[Federal Register Volume 64, Number 193 (Wednesday, October 6, 1999)]
[Proposed Rules]
[Pages 54448-54472]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-25457]



[[Page 54447]]

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Part IV





Department of Transportation





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Federal Aviation Administration



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14 CFR Part 450



Financial Responsibility Requirements for Licensed Reentry Activities; 
Proposed Rule

  Federal Register / Vol. 64, No. 193 / Wednesday, October 6, 1999 / 
Proposed Rules  

[[Page 54448]]



DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 450

[Docket No. FAA-1999-6265; Notice No. 99-17]
RIN 2120-AG76


Financial Responsibility Requirements for Licensed Reentry 
Activities

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking (NPRM).

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SUMMARY: The Commercial Space Act of 1998 (CSA) directs the FAA to 
establish financial responsibility requirements covering risks 
associated with the licensed reentry of a reentry vehicle. The FAA 
would determine, on an individual basis, the amount of required 
insurance or other form of financial responsibility after examining the 
risks associated with a particular reentry vehicle, its operational 
capabilities and designated reentry site. This proposal provides 
general rules for demonstrating compliance with insurance requirements 
and implementing statutory-based Government/industry risk sharing 
provisions in a manner comparable to that currently utilized for 
commercial launches.

DATES: Comments must be received by December 6, 1999.

ADDRESSES: Comments on this document should be mailed or delivered, in 
duplicate, to: U.S. Department of Transportation Dockets, Docket No. 
[FAA-1999-6265], 400 Seventh Street, SW., Room Plaza 401, Washington, 
DC 20590. Comments may be filed and examined in Room Plaza 401 between 
10 a.m. and 5 p.m. weekdays, except Federal holidays. Comments also may 
be sent electronically to the Dockets Management System (DMS) at the 
following Internet address: http://dms.dot.gov/. Commenters who wish to 
file comments electronically, should follow the instructions on the DMS 
web site.

FOR FURTHER INFORMATION CONTACT: Ms. Esta M. Rosenberg, Attorney-
Advisor, Regulations Division, Office of the Chief Counsel, Federal 
Aviation Administration, U.S. Department of Transportation (202) 366-
9320.

SUPPLEMENTARY INFORMATION:

Comments Invited

    Interested persons are invited to participate in the making of the 
proposed action by submitting such written data, views, or arguments, 
as they may desire. Comments relating to the environmental, energy, 
federalism, or economic impact that might result from adopting the 
proposals in this document also are invited. Substantive comments 
should be accompanied by cost estimates. Comments must identify the 
regulatory docket or notice number and be submitted in duplicate to the 
DOT Rules Docket address specified above.
    All comments received, as well as a report summarizing each 
substantive public contact with FAA personnel concerning this proposed 
rulemaking, will be filed in the docket. The docket is available for 
public inspection before and after the comment closing date.
    All comments received on or before the closing date will be 
considered by the Administrator before taking action on this proposed 
rulemaking. Comments filed late will be considered as far as possible 
without incurring expense or delay. The proposals in this document may 
be changed in light of the comments received.
    Commenters wishing the FAA to acknowledge receipt of their comments 
submitted in response to this document must include a pre-addressed, 
stamped postcard with those comments on which the following statement 
is made: ``Comments to Docket No. FAA-1999-6265.'' The postcard will be 
date stamped and mailed to the commenter.

Availability of NPRMs

    An electronic copy of this document may be downloaded using a modem 
and suitable communications software from the FAA regulations section 
of the FedWorld electronic bulletin board service (telephone: (703) 
321-3339) and the Government Printing Office (GPO)'s electronic 
bulletin board service (telephone: (202) 512-1661).
    Internet users may reach the FAA's web page at http://www.faa.gov/
avr/arm/nprm/nprm.htm or the GPO's web page at http://
www.access.gpo.gov/nara access to recently published rulemaking 
documents.
    Any person may obtain a copy of this document by submitting a 
request to the Federal Aviation Administration, Office of Rulemaking, 
ARM-1, 800 Independence Avenue SW., Washington, DC 20591, or by calling 
(202) 267-9680. Washington, DC 20591, or by calling (202) 267-9680. 
Communications must identify the notice number or docket number of this 
NPRM.
    Persons interested in being placed on the mailing list for future 
rulemaking documents should request from the above office a copy of 
Advisory Circular No. 11-2A, Notice of Proposed Rulemaking Distribution 
System, which describes the application procedure.

Background

    The Commercial Space Act of 1998 (CSA), Public Law 105-303, grants 
new authority to the Secretary of Transportation over the licensing and 
regulation of reentry vehicle operators and the operation of reentry 
sites by a commercial or non-Federal entity. In addition to licensing 
launches of expendable launch vehicles and the commercial operation of 
launch sites, the Secretary is now authorized to license reentries and 
the operation of reentry sites when those activities are conducted 
within the United States or by U.S. citizens abroad. Statutory 
objectives in licensing reentry activities are to ensure that public 
health and safety and the safety of property are not jeopardized as a 
result of reentry activities and consistency with U.S. national 
security and foreign policy interests, including treaty obligations 
entered into by the United States.
    Responsibility for commercial space transportation has been 
assigned by the Secretary of Transportation to the Administrator of the 
Federal Aviation Administration (FAA), who in turn has delegated 
regulatory and related authority over commercial space transportation 
to the Associate Administrator for Commercial Space Transportation 
(AST).
    On April 21, 1999, the FAA issued proposed rules governing 
licensing and other regulatory requirements applicable to non-Federal 
reentry activities. See 64 FR 19626-19666. Referred to herein as the 
Reusable Launch Vehicle or RLV Licensing Regulations, the proposed 
rules explain the agency's comprehensive approach to evaluating RLV 
mission risk and provide additional insight into the FAA's regulatory 
objectives in licensing reentry. The comment period closed on July 20, 
1999. Intended as a companion document to the RLV Licensing 
Regulations, this rulemaking elaborates upon the FAA's proposed 
approach to licensing launch and reentry of an RLV or other reentry 
vehicle. It does not reflect a final determination by the FAA on the 
scope and characteristics of an RLV licensing program.
    In addition to granting reentry licensing authority, the CSA 
further amends 49 U.S.C. Subtitle IX, chapter 701, popularly referred 
to as the Commercial Space Launch Act of 1984 (CSLA), by extending 
existing requirements for financial responsibility and risk allocation 
to licensed reentries. In doing so, Congress has committed the

[[Page 54449]]

Government to share in the operational risks associated with 
development and use of reentry technology for commercial purposes.
    Under the amendments, both the burdens of the CSLA risk allocation 
scheme and its benefits apply to licensed reentries. Perhaps of 
greatest significance to prospective reentry vehicle operators is 
congressional affirmation in the newly enacted legislation that the 
payment of excess claims (or ``indemnification'') provisions of 49 
U.S.C. 70113 apply to a licensed reentry just as they do to a licensed 
launch. Unaffected by the Commercial Space Act of 1998, however, is the 
existing sunset provision that appears in 49 U.S.C. 70113(f), limiting 
eligibility for Government indemnification to reentries conducted under 
a license for which a complete and valid application has been received 
by the FAA by the end of 1999.1
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    \1\ If enacted, pending legislation would extend the sunset 
provision an additional five to ten years.
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    On August 26, 1998, the agency issued final rules implementing CSLA 
financial responsibility (insurance) and risk allocation requirements 
for licensed launch activities. 63 FR 45592-45625. The final rules, 
codified at 14 CFR part 440, establish in regulations a risk-based 
approach, known as maximum probable loss (MPL) methodology, to 
determining insurance requirements. Included in part 440 are 
requirements for insuring loss or damage to government range property 
and for liability insurance providing coverage for all launch 
participants, including the U.S. Government, in the event of claims by 
a third party for damage or loss resulting from licensed launch 
activities. The final rules also implement statutory requirements for 
reciprocal waivers of claims among launch participants whereby each 
participant is required to waive certain claims it may have for damage 
or loss against each of the other launch participants and accept 
financial responsibility for losses suffered by its own personnel. And, 
in accordance with the CSLA, the final rules reflect the U.S. 
Government's participation in statutorily directed risk allocation 
through the reciprocal waiver of claims and by providing for payment of 
certain third party claims, subject to congressional appropriation of 
funds. Under the CSLA, the government may cover or ``indemnify'' third-
party liability of all launch participants when liability exceeds 
required insurance, up to a statutory ceiling of $1.5 billion (as 
adjusted for inflation after January 1, 1989) above insurance.
    As indicated in the financial responsibility rulemaking for 
licensed launch activities, the risk-sharing scheme enacted in 1988 and 
recently extended to cover licensed reentries benefits the aerospace 
industry, including customers of commercial launch and reentry 
services, as well as the government. The aerospace industry is relieved 
of the risk of catastrophic liability which would be difficult and 
costly, if not impossible, to manage with private insurance if each 
launch participant had to obtain $2 billion of coverage.2 
The government benefits from the statutory risk sharing scheme through 
CSLA-mandated liability coverage, up to a defined amount, which 
financially insulates the government from its own risk of liability 
exposure including liability for certain damage on the ground or to 
aircraft in flight when the United States is deemed a launching State 
under the terms of the Outer Space Treaties, specifically the 
Convention on International Liability Caused by Space Objects 
(Liability Convention, entered into force September 1972). Liability 
for damage caused elsewhere, such as to satellites on orbit, is also 
assigned to the government under the Liability Convention if it is the 
fault of persons for whom the launching State is responsible. In 
addition, under Article VI of the Treaty on Principles Governing the 
Activities of States in the Exploration and Use of Outer Space, 
including the Moon and Other Celestial Bodies (Outer Space Treaty, 
entered into force October 1967), the United States bears international 
responsibility for activities carried on in space by non-governmental 
entities.
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    \2\ The amount of $2 billion represents the amount of 
indemnification that may be made available to launch participants 
without adjusting for inflation, or $1.5 billion, added to the 
maximum amount of liability insurance that may be required under the 
terms of 49 U.S.C. 70112(a)(3)(A), or $500 million.
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    Risk allocation under the CSLA contemplates the following quid pro 
quo arrangement. A launch or reentry licensee provides insurance 
covering the first tier of risk for all entities, including the 
government, involved in licensed space launch or reentry activity. In 
return, the government agrees to be responsible for its own liability 
and that of launch or reentry participants, subject to Congressional 
appropriation of funds, up to an additional $1.5 billion (with an 
adjustment for post-January 1, 1989 inflation). The commercial space 
transportation industry is thereby relieved of the risk of catastrophic 
losses within the second tier of risk (statutorily required insurance 
plus $1.5 billion, as adjusted for post-January 1, 1989 inflation). The 
third tier of risk, or claims in excess of the combined total of 
required insurance plus $1.5 billion (as adjusted), is the 
responsibility of the party adjudged by a court to be legally liable 
for the claims. As a regulatory matter, the agency imposes financial 
responsibility for the third tier of risk on the launch licensee, and 
in this notice proposes to do likewise with respect to a reentry 
operator or licensee, unless it has no liability whatsoever for such 
claims.

The COMET/METEOR Experience

    The authority granted by the Commercial Space Act of 1998 (CSA) is 
the culmination of several years of Administration effort to grant 
specific licensing authority to the Department of Transportation over 
reentry of a reentry vehicle. The agency's efforts began in 1993, when 
its evaluation of the COMET reentry vehicle highlighted the limitations 
of the CSLA in keeping pace with advancements in technology.
    COMET, or the Commercial Experiment Transporter, began as a 
commercial program administered through the National Aeronautics and 
Space Administration's (NASA's) Centers for the Commercial Development 
of Space. COMET was intended to provide a low cost, medium-term (30 
day) platform in space for the conduct and return to Earth of 
microgravity experiments. (The COMET Program and the agency's approach 
to authorizing its activity are described in several Federal Register 
Notices. See 57 FR 10213, March 24, 1992; 57 FR 55021, November 23, 
1992; and 60 FR 39476, August 2, 1995.) Initially, three operators were 
involved and required agency regulatory oversight with respect to 
public safety-related operations. EER Systems, Inc., was responsible 
for placing in orbit the COMET reentry vehicle system, known as the 
Freeflyer, using a Conestoga expendable launch vehicle. Westinghouse 
Electric Corporation was responsible for operation of the service 
module, the component of the Freeflyer that would remain operational 
while on orbit for an additional 180-day period. Upon command from 
Earth, the Freeflyer would separate into two components and the reentry 
vehicle portion, designed and operated by Space Industries, Inc., would 
reenter Earth atmosphere targeting a designated landing site on Earth 
where experiments could be recovered.
    Criteria utilized by the agency in evaluating reentry safety are 
described in a Federal Register Notice (57 FR 10213, March 24, 1992), 
and the

[[Page 54450]]

agency's experience in implementing the criteria is recounted in the 
related notice of proposed rulemaking referred to herein as the RLV 
Licensing Regulations. The COMET Program was terminated due to funding 
problems but was subsequently resurrected under a NASA contract. EER 
Systems, Inc. became responsible for both launch and reentry 
operations. Capability of the reentry vehicle system, renamed METEOR, 
was never demonstrated, however, because of the Conestoga launch 
failure which destroyed the METEOR system shortly after lift-off.
    Initially, the agency's approach to the COMET Program was to 
license the reentry event separately from the launch event under its 
existing authority to license the launch of a launch vehicle on a 
suborbital trajectory. The determination to issue a separate license 
for return to Earth of the reentry vehicle was based, in large measure, 
on the fact that the reentry vehicle operator's identity was different 
from that of the launch operator, and that responsibility over the 
subsequent reentry (30 days following completion of the launch) ought 
not be imposed regulatorily on the launch operator whose responsibility 
for launch safety would terminate upon safing of the Conestoga 
expendable launch vehicle upper stage.
    By letter from the House Chairman of the Subcommittee on Space to 
the Director of the Office of Commercial Space Transportation or OCST 
(the predecessor office to FAA's Associate Administrator for Commercial 
Space Transportation or AST), OCST was advised that it did not have 
explicit licensing authority over payloads but that it should continue 
its safety review of reentry vehicle operations associated with the 
launch.
    In the September 2, 1992 letter, the House Subcommittee Chairman 
indicated that the Committee would seek legislation addressing 
commercial reentry vehicle licensing issues, including indemnification 
and liability.3 OCST continued its evaluation of the COMET 
Freeflyer, and then METEOR, under its authority to evaluate missions 
and payloads not otherwise licensed by the Federal government, for 
purposes of assuring that its launch would not jeopardize public 
safety. In the meantime, OCST was further advised by House Subcommittee 
staff that claims for loss or damage resulting from reentry of the 
COMET reentry vehicle would not be eligible for indemnification because 
there was no authority to indemnify claims resulting from operation of 
a payload absent a clear causal nexus to the launch event. Accordingly, 
as a condition of NASA's contract with EER Systems for the conduct of 
microgravity research and experimentation services, NASA required 
insurance covering the government's potential liability, including that 
arising under the Outer Space Treaties, as a result of the reentry. The 
amounts of reentry liability and government property insurance 
established by NASA as a condition of its contract were the same 
requirements as OCST had ordered for the Conestoga launch using MPL 
methodology although OCST had not addressed reentry risk in its 
assessment of financial responsibility requirements for launch.
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    \3\ Implicit in the House Subcommittee letter, and made explicit 
in congressional report language accompanying passage of the CSA (as 
well as predecessor legislation), is rejection by the House 
Committee on Science of the notion that the return to Earth of a 
launch vehicle on a suborbital trajectory is separately licensable 
as a launch under the agency's longstanding launch licensing 
authority.
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    Each year since 1993, the Administration has proposed, and Congress 
has acted favorably upon, authorizing legislation that would allow the 
agency to license reentry operations and establish MPL-based insurance 
requirements for licensed reentries. In 1998, legislation was finally 
enacted authorizing the agency's regulatory responsibilities for 
reentry licensing and risk management.

Risk-Based Insurance

    In 1995, the agency completed a study evaluating the sufficiency 
and applicability of CSLA financial responsibility requirements to 
licensed reentry operations. The study evaluated the adequacy and 
appropriateness of using risk-based methodology, known as maximum 
probable loss (MPL), in establishing liability and government property 
insurance requirements for reentry using a COMET-type reentry vehicle 
as a model. MPL has been used successfully by the agency since 1989 in 
determining insurance requirements for launch operations, including 
preparatory activities conducted at a launch site and flight of a 
launch vehicle. The study also evaluated whether statutory ceilings on 
launch insurance requirements ($500 million for liability and $100 
million for government property) would be adequate for reentry 
operations. Finally, the study explored whether insurance capacity 
existed in the market to underwrite required coverages at reasonable 
cost.
    The study's findings were favorable on all accounts. MPL 
methodology was determined to be appropriate and adequate for assessing 
reentry risk and statutory ceilings on insurance requirements were 
found appropriate to cover reentry risk. The study concluded that if 
the $500 million liability ceiling were not sufficient to adequately 
address the liability risk that attends reentry activity then perhaps 
the reentry proposal under review would prove too hazardous to be 
authorized by the agency.4 In this manner, risk assessment 
functions as an indicator of acceptable risk in carrying out the 
agency's public safety responsibilities, as well as providing the basis 
for financial responsibility requirements. Whether the activity under 
consideration is launch or reentry, if MPL assessment would yield an 
unusually high value (as compared with other authorized space 
activities) the FAA believes it may signal the need to mitigate further 
the risks associated with a proposed space transportation activity 
before a license would be granted, to ensure that risks to public 
safety are confined to a reasonable level.
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    \4\ For example, assigning $3 million as the value of life used 
for purposes of determining maximum probable loss, as explained in 
the notice of proposed rulemaking regarding financial responsibility 
for licensed launch activities (61 FR 38992-39021, at 39007, July 
25, 1996), the maximum allowable liability insurance requirement 
under the CSLA or $500 million, would account for an event resulting 
in 167 casualties, assuming no property damage. If a sufficiently 
probable event were associated with a reentry proposal that would 
result in such significant casualties it would not pass muster under 
the FAA's safety review and would therefore not qualify for reentry 
licensing.
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Reentry Technology and Reusable Launch Vehicles (RLVs)

    The licensing authority granted by the Commercial Space Act of 1998 
(CSA) allows for separate licensing of launch and reentry vehicle 
operators, as in the initial COMET proposal, but is equally applicable 
to reusable launch vehicle (RLV) concepts undergoing design reviews and 
testing protocols at the end of the 20th century.
    Certain reusable or partially reusable launch vehicle concepts 
currently under development are reentry vehicles, as defined by the 
CSA; however, they bear little resemblance to the COMET/METEOR reentry 
vehicle evaluated by AST in the early 1990's. Whereas COMET/METEOR was 
to be launched as a payload and was intended to provide a microgravity 
platform for medium-term experimentation (30 days or more of on-orbit 
microgravity environment before intact reentry), the majority of 
reentry concepts today are intended to respond to projected growth in 
the telecommunications satellite services industry and other demands 
for lower

[[Page 54451]]

cost access to low Earth orbit. Constellations of satellites in low 
Earth orbit (LEO) provide mobile telecommunications capabilities and 
are responsible for 71 percent of forecasted launches over the next 12 
years. See 1999 Commercial Space Transportation Forecasts, issued by 
the FAA and the Commercial Space Transportation Advisory Committee 
(COMSTAC). Demand for such services, including replenishment of large 
and small LEO constellations, account for market projections of 975 to 
1,195 payloads to be launched in the next 12 years. RLV concepts are 
targeting the anticipated surge in launch activity that will be 
required to maintain constellation services and intend to obtain market 
share by offering faster and cheaper launch services.
    Reentry vehicle and RLV concepts vary widely. Some, like 
VentureStar, present single stage to orbit capability while others, 
such as Kistler Aerospace Corporation's K-1 vehicle, contemplate use of 
multiple stages to perform payload delivery services. Other RLV 
concepts, such as that under development by Kelly Aerospace, rely on 
aircraft technology and airborne launch-assist concepts in combination 
with more conventional rocket motor technologies to attain desired 
altitude and destination. Airborne launch systems are not new to the 
world of commercial aerospace launch concepts, however. The Pegasus 
launch system, carried aloft by a modified L-1011 aircraft, has a 
proven record of providing reliable expendable launch vehicle services.

RLV Launch and Reentry Financial Responsibility

Mission Approach

    The RLV Licensing Regulations describe the FAA's proposal to 
fulfill its safety mandate in a manner that accommodates developments 
in RLV technology and industry needs. The FAA proposes to retain 
discretion to grant both launch and reentry authorizations in a single 
RLV mission license using a measure of safety for vehicle operations 
consistent with that currently employed for launches of expendable 
launch vehicles at Air Force ranges. Both ascent and descent flight 
phases must be evaluated and authorized by the FAA in accordance with 
FAA safety criteria for the mission; however, launch and reentry 
authorizations or licenses may be combined in a single license 
document. Application of a combined risk measure to ascent and descent 
flight phases of a launch vehicle reflects the FAA's determination that 
the public should not be exposed to greater safety risk in 
accomplishing a round-trip mission using an RLV to place a payload in 
orbit. Nor should the public be exposed to greater risk by virtue of 
the vehicle's ability to achieve Earth orbit or outer space before 
landing on Earth. See 64 FR at 19631. The FAA's proposed mission 
approach to licensing an RLV operator is explained in detail in the 
proposed RLV Licensing Regulations issued for public comment on April 
21, 1999. See 64 FR 19626-19666.
    Occurrences during both launch and reentry must be covered through 
financial responsibility provided by the licensee, up to required 
amounts. As amended by the CSA, 49 U.S.C. 70112(a) directs the agency 
to establish financial responsibility requirements that accompany a 
license authorizing launch or reentry, up to statutory ceilings 
(currently, $500 million for third party liability and $100 million for 
government property damage). Up to $500 million of liability insurance 
may therefore be required for launch of an RLV, based upon the FAA's 
determination of the maximum probable loss that may result from launch, 
as well as up to $500 million of liability insurance to cover third 
party liability resulting from its reentry.
    The government shares in launch and reentry risks through the 
payment of excess claims, or so-called ``indemnification,'' 
5 provisions set forth in 49 U.S.C. 70113, which provide for 
payment by the government of claims related to a launch or reentry in 
excess of required insurance. In accordance with the quid pro quo 
arrangement contemplated by the statute, an RLV operator would be 
eligible for indemnification of excess third party claims that result 
during either, or both, the launch phase of licensed RLV flight and its 
reentry. Accordingly, it is necessary to define the scope of licensed 
launch activities, as distinct from licensed reentry activities, 
involved in an RLV mission in order to allocate risk and assign 
financial responsibility requirements to the appropriate phase of 
licensed flight and to clarify how the government is expected to share 
in launch or reentry risk through its indemnification responsibilities 
under 49 U.S.C. 70113(a).
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    \5\ Commonly referred to as ``indemnification,'' the payment of 
excess claims provisions of 49 U.S.C. 70113 provide procedures 
whereby Congress may enact legislation appropriating funds to cover 
liability of launch participants that is in excess of the amount of 
insurance required under 49 U.S.C. 70112(a)(1)(A).
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    A seamless approach to RLV mission regulation is envisioned for 
most of the RLV concepts currently under development and, similarly, 
seamless financial responsibility requirements would generally apply as 
well. The FAA is proposing a flexible approach to accomplishing this 
result. A license order may distinguish launch financial responsibility 
requirements from reentry financial responsibility requirements where, 
for example, risks presented by launch of a fully fueled vehicle differ 
in nature or magnitude from those presented by reentry of an RLV that 
has expelled all or nearly all of its explosive propellant and 
capability. Alternatively, the FAA may find that a uniform level of 
financial responsibility is sufficient to cover both launch and reentry 
risk, although insurance must be available to respond to claims that 
arise during both launch and reentry, up to the required amount for 
each phase of licensed flight.
    The agency reserves authority to determine, on a case-by-case 
basis, whether to establish differentiated insurance requirements for 
RLV launch as opposed to reentry of an RLV from Earth orbit or outer 
space. Circumstances in which it would be appropriate to do so include 
launch at one site with reentry to a different site because different 
populations would be exposed to launch vehicle risks yielding 
potentially different MPL valuations. Also, the FAA understands that an 
RLV may be greater in size, blast capability and explosive potential 
during ascent than descent if it will shed stages, as would the Kistler 
K-1 vehicle, before achieving orbit and subsequently reentering into 
Earth atmosphere. Moreover, an RLV would be fully fueled for launch 
whereas it would have exhausted or expelled all or most of its 
hazardous propellants before planned landing on Earth. On the other 
hand, launch risks can be mitigated by ensuring that the vehicle's 
instantaneous impact point (the point on Earth where vehicle and debris 
impact would be realized in the event of a flight failure such as loss 
of thrust or vehicle break-up) remains over unpopulated areas or has no 
significant dwell time over any populated area, whereas reentry risks 
are, at least in some part, a function of vehicle reliability and size 
of the targeted landing site. (The related RLV Licensing Regulations 
explain the FAA's proposed requirements for assessing the adequacy and 
suitability of a proposed reentry site.) Where launch and reentry risks 
are comparable in magnitude, however, the FAA may impose parallel 
requirements for launch and reentry.
    In any case, because an event could occur during both launch and 
reentry, particularly where multiple stage

[[Page 54452]]

vehicles are used, financial responsibility must be available to 
respond to claims arising during either or both flight phases. Having 
uniform or consistent insurance requirement in place over the course of 
the mission is not intended to limit responsibility of the licensee to 
cover the liability that results from an RLV mission.
    The agency requests public comment on its approach to assessing 
risk for RLV operations in light of the FAA's proposed mission approach 
to RLV licensing, that is, whether it is reasonable and prudent to 
separately assess and establish insurance requirements based upon 
launch or ascent risks as distinct from reentry or descent risks, and 
the circumstances, if any, under which it would be appropriate to do 
so. Comments are requested on whether insurance determinations that 
distinguish launch from reentry would hinder, rather than help, claims 
settlement.

Scope of RLV Launch Authorization

    Financial responsibility requirements applicable to RLV launches 
are provided in 14 CFR Part 440, whose requirements are intended to 
address launch anomalies and losses resulting from a licensed launch. 
Losses that result from or are causally related to performance of the 
launch vehicle during its ascent would be addressed through part 440 
requirements and eligible for indemnification under 49 U.S.C. 70113, 
when they exceed required launch liability insurance.
    The CSA amended the definition of ``launch'' contained in the CSLA 
by including within its meaning ``activities involved in the 
preparation of a launch vehicle or payload for launch, when those 
activities take place at a launch site in the United States.'' 49 
U.S.C. 70102(3). Incorporating this amendment, the FAA's recently 
issued licensing regulations define the term ``launch'' to include 
``pre-flight ground operations beginning with the arrival of a launch 
vehicle or payload at a U.S. launch site.'' 14 CFR 401.5. See 64 FR 
19586-19624. The RLV Licensing Regulations propose to continue use of 
this definition with respect to RLV launches. 64 FR at 19655.
    However, the FAA has proposed a different end point, payload 
deployment, for purposes of defining licensed RLV launch flight from 
that applied to launch of an expendable launch vehicle or ELV, as 
described in the supplementary information accompanying the RLV 
Licensing Regulations. 64 FR at 19632-33.6 (The definition 
of ``launch'' that appears in Sec. 401.5 of the RLV Licensing 
Regulations erroneously fails to reflect the proposed change.) In the 
licensing regulations issued recently, the FAA reaffirmed that its 
safety mandate, which includes public safety and safety of property, 
requires that it exercise licensing authority over the launch of a 
launch vehicle through the point after payload separation when the last 
action occurs over which a licensee has direct or indirect control over 
the launch vehicle. See Commercial Space Transportation Licensing 
Regulations; Final Rule, 64 FR 19586, at 19594, April 21, 1999. For 
launches of expendable launch vehicles (ELVs), that point typically 
occurs upon ``safing'' of the vehicle's upper stage or otherwise 
rendering the upper stage inert so as to mitigate sufficiently the 
explosive potential of any remaining energy sources on board the 
vehicle. Defining the end of licensed launch activity in this manner 
minimizes the risk and consequences of collision with other orbiting 
space objects as well as orbital debris generation. As previously 
noted, the FAA's definition of ``launch'' is codified at 14 CFR 401.5.
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    \6\ The related rulemaking addressing RLV Licensing Regulations 
offers detailed guidance, summarized in this Notice, on the proposed 
scope of licensed launch and reentry flight phases of an RLV. See 64 
FR 19626, at 19631-19633, April 21, 1999.
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    In the RLV Licensing Regulations, the FAA has suggested using 
payload deployment to define the end of an RLV launch, instead of the 
control test applied by the FAA to define the end of an ELV launch. 
Reference to the licensee's last exercise of control over the launch 
vehicle is appropriate for ELVs but if applied to RLV technology would 
mean that a launch might not be concluded under the terms of the 
definition until reentry is complete, contrary to the CSA. Also, in 
order to accomplish reentry, an RLV operator would retain (or design 
in) certain control over the vehicle in order to ready it for reentry 
and energy sources would retain their explosive potential remaining 
capable of activation while the vehicle is on orbit. The control test 
is simply not appropriate for RLVs.
    As discussed in the RLV Licensing Regulations, the FAA proposes 
instead to limit the definition of ``launch'' that appears in 14 CFR 
401.5 to ELV launches and to use accomplishment of the launch phase of 
the mission, that is, the point of payload deployment (or attempted 
payload deployment), to define the end of licensed launch activities 
when the launch vehicle is an RLV. If adopted in final rules, this 
definition offers the added benefit of providing a bright line 
reference point for distinguishing the end of licensed launch flight 
from other mission phases for most RLV activities that will occur in 
the foreseeable future.

Scope of RLV Reentry Authorization

    The CSA amends the CSLA by imposing financial responsibility 
requirements for RLV and other reentry vehicle reentries in a manner 
comparable to that required for licensed launches. Insurance or other 
form of financial responsibility would be required to address losses to 
third parties and government property resulting from a licensed 
reentry.
    A reentry subject to FAA licensing authority means ``to return or 
attempt to return, purposefully, a reentry vehicle (including an RLV) 
and its payload, if any, from Earth orbit or from outer space to 
Earth.'' 49 U.S.C. 70102(10). The proposed RLV Licensing Regulations 
define ``reentry'' to include ``activities conducted in Earth orbit or 
outer space to determine reentry readiness and [that] are therefore 
unique to reentry and critical to ensuring public health and safety and 
the safety of property during reentry.'' 64 FR at 19656. The 
accompanying Supplementary Information further explains that licensed 
reentry activity would commence at the point following payload 
deployment when vehicle hardware and software begin to be readied for 
reentry. Once a payload has been deployed, RLV operations, whether 
designed into the vehicle or controlled from Earth, would be directed 
at readying the vehicle for reentry and verifying reentry readiness of 
structures, propulsion systems, and vehicle orientation, attitude and 
safety systems, including software. See 64 FR at 19632-33. For RLVs 
intended to enter outer space but not Earth orbit, and for those RLVs 
intended to remain on orbit for a relatively brief duration, such as 
days or possibly weeks, the RLV Licensing Regulations provide that the 
licensed reentry phase of an RLV mission would therefore commence 
immediately following payload deployment. In such circumstances, there 
would be no on orbit activity that is not covered by a license and 
associated statutory financial responsibility requirements. In other 
circumstances, such as delayed reentry by design, the FAA has requested 
comments in the RLV Licensing Regulations on the appropriate 
commencement point of reentry licensing authority from a safety 
perspective and now solicits public

[[Page 54453]]

comment from a financial responsibility and risk management 
perspective.
    In proposing to include within the scope of a reentry license that 
period of on-orbit activity during which preparatory activities to 
ensure reentry readiness are conducted, the FAA considered the 
following: the Report of the House Committee on Science that 
accompanied passage of H.R. 1702, the predecessor legislation to the 
CSA, H. Rep. 105-347, 105th Cong., 1st Sess. (Committee Report), the 
scope of launch licenses for ELV launches, and reentry risks for which 
statutorily mandated financial responsibility and risk allocation are 
necessary and meaningful.
    The FAA's proposed approach to defining those reentry activities 
that may be encompassed by a license is consistent, generally, with 
concerns expressed in the Committee Report. In its Report, the House 
Committee on Science (the Committee) indicated that ``the term 
`reentry' is intended to cover a wide range of activities, including 
the act of returning a reusable launch vehicle to Earth. In 
establishing the legal framework for reentry, the Committee's approach 
is to treat reentry of a reentry vehicle the same as launch of a launch 
vehicle.'' H. Rep. 105-347, 105th Cong., 1st Sess., at 21. The 
Committee further noted that ``for purposes of the license requirement, 
reentry begins when the vehicle is prepared specifically for reentry. 
By way of definition, the Committee intends the term to apply to that 
phase of the overall space mission during which the reentry is 
intentionally initiated. Although this may vary slightly from system to 
system, as a general matter the Committee expects reentry to begin when 
the vehicle's attitude is oriented for propulsion firing to place the 
vehicle on its reentry trajectory.'' Id. Specifically excluded from the 
intended scope of FAA licensing authority over reentry would be 
transportation events in space that are wholly unrelated to launch or 
reentry, such as maneuvers between orbits, according to the Committee 
Report. Id. at 22-23.
    As reflected in the RLV Licensing Regulations and summarized here, 
the FAA also finds in the Committee's expansive definition of the term 
``launch'' guidance that is useful and instructive in delimiting ``that 
phase of the overall space mission during which the reentry is 
intentionally initiated'' and to which FAA reentry licensing authority 
and associated financial responsibility requirements are intended to 
apply. Id. at 21. The Committee Report defines the term ``launch'' for 
purposes of license coverage to include activities preceding flight 
that entail critical preparatory steps to initiating flight, are unique 
to space launch and are so hazardous as to warrant agency regulatory 
oversight, as long as they are conducted at a launch site in the United 
States, even if that site is not ultimately the site of the actual 
launch. Id. at 22. Safety concerns over the hazardous nature of such 
activities underlie the Committee's rationale for extending the term 
``launch'' to include them. To fully comprehend such activities within 
the scope of a launch license and to ensure fulfillment of the FAA's 
statutory mandate regarding public safety and safety of property, the 
FAA recently issued final rules defining ``launch'' to include 
activities involved in the preparation of a launch vehicle for flight 
when those activities take place at a launch site in the United States, 
commencing upon arrival of a launch vehicle or payload at a launch 
site.7 14 CFR 405.1. Arrival of a launch vehicle or its 
major components was selected by the agency to provide an appropriate 
and clear commencement point of FAA regulatory authority over a launch 
because that event generally signals a change in risks to public safety 
and property due to the hazardous nature of activities that occur 
thereafter.
---------------------------------------------------------------------------

    \7\ The CSA amends the statutory definition of ``launch'' by 
expressly including preparatory activities at a launch site; 
however, prior to the amendment the FAA proposed to include such 
activities in a regulatory definition ``launch'' in order to fulfill 
its safety mandate. See Notice of Proposed Rulemaking, ``Commercial 
Space Transportation Licensing Regulations,'' 62 FR 13216-13273.
---------------------------------------------------------------------------

    Similarly, risks to public safety and to property, both on orbit 
and on Earth, change significantly as a result of RLV operation on 
orbit or in outer space due to heightened risk of an anomalous event 
that may result in on orbit collision, uncontrolled reentry, or other 
non-nominal or unplanned occurrence. Therefore, for safety reasons 
comparable to those underlying the FAA's determination that ``launch'' 
includes preparatory activities preceding vehicle flight, the FAA has 
proposed in the RLV Licensing Regulations to define ``reentry'' to 
include those ``activities conducted in Earth orbit or outer space to 
determine reentry readiness and are therefore unique to reentry and 
critical to ensuring public health and safety and the safety of 
property during reentry.'' 64 FR at 19656. The event of payload 
deployment appropriately marks the end of licensed launch flight and 
would be followed immediately thereafter by reentry activities 
comprehended by the FAA's licensing authority. Consistent with the 
FAA's approach to defining ``launch'' of a launch vehicle, the FAA 
approach offers a bright line demarcation between the end of licensed 
RLV launch flight and commencement of licensed reentry activities for 
purposes of clarity and consistency.
    Where a licensed launch would be followed immediately by a licensed 
reentry, a seamless risk management program would apply to all vehicle 
flight. A seamless approach is therefore contemplated for those 
vehicles launched into outer space on a suborbital trajectory and 
designed to reenter from outer space without ever entering an orbital 
path. It would also apply to those vehicles intended to spend minimal 
time on orbit and subsequently reenter purposefully upon activation or 
initiation of a reentry system once reentry readiness has been 
verified. CSLA-directed financial responsibility and risk allocation 
would cover ascent and descent flight phases of such vehicles, 
including flight on orbit or in outer space in furtherance of reentry 
readiness. However, inter-orbit maneuvers or transfer operations that 
are not performed as part of launch or reentry, as defined by the FAA, 
are not covered by the FAA's licensing authority and are therefore not 
intended to be addressed through statutorily mandated financial 
responsibility requirements. Risks associated with those activities 
would remain outside the CSLA financial responsibility and risk 
allocation program.

Non-Nominal Reentry

    The broad scope of reentry licensing authority proposed in the RLV 
Licensing Regulations is necessary, in the FAA's view, to fulfill the 
legislative purpose underlying statutorily-mandated financial 
responsibility in the first instance, that is, financial protection of 
launch participants, including the U.S. Government, in the event of an 
unplanned occurrence, such as a non-nominal or premature reentry, 
resulting in third party liability. It is also necessary to make 
eligibility for indemnification by the government a meaningful benefit 
for the RLV industry in exchange for its coverage of the government's 
liability exposure up to a prescribed amount, at no cost to the 
government.
    Coverage under the CSLA financial responsibility and risk 
allocation scheme is co-extensive with licensed activity and also 
addresses proximate results or consequences of licensed activity. 
Liability insurance under 49 U.S.C. 70112 provides coverage for claims 
``resulting from an activity carried out under the license; * * *''

[[Page 54454]]

(emphasis added) 49 U.S.C. 70112(a)(1). Similarly, indemnification 
under the CSLA becomes the government's responsibility, up to the 
statutorily prescribed ceiling, to the extent of excess claims 
``resulting from an activity carried out under the license.'' (emphasis 
added) 49 U.S.C. 70113(a).
    The FAA considers that its proposed scope of reentry licensing and 
related requirements for financial responsibility are appropriate and 
necessary to cover non-nominal reentries, including reentries that are 
premature or unplanned and therefore technically 
unauthorized.8 Statutory requirements for assuring financial 
responsibility of the licensee and the associated indemnification of 
liabilities that result from licensed activities acknowledges that non-
nominal events, including accidents, may in fact occur as a result of 
the extremely hazardous activities of launch or reentry. As with 
launch, licensed pre-flight activity conducted in preparation for 
vehicle flight, be it launch or reentry, creates safety risks 
warranting regulatory oversight by the FAA and may give rise to 
liability owing to its hazardous nature and attendant consequences. To 
adequately protect government interests, as well as to ensure financial 
resources exist to adequately cover launch and reentry participant 
liability, the FAA believes that events that precede the final 
initiation of reentry into Earth atmosphere, including the prospect of 
a non-nominal reentry, must be covered by a reentry license and 
associated financial responsibility and risk allocation requirements.
---------------------------------------------------------------------------

    \8\ Inclusion of the term ``purposefully'' in the definition of 
``reenter'' and reentry'' clarifies that the unplanned or unintended 
reentry of any space object that is not a reentry vehicle, as 
defined by the statute, is not encompassed in the agency's licensing 
authority. Accordingly, sections 70112 and 70113 (CSLA risk 
allocation) would not apply to such events unless they are clearly 
and causally related to a licensed launch or reentry. The agency 
does not believe that use of the term ``purposefully'' is intended 
to necessarily exclude premature or other non-nominal reentries. It 
is also not intended to exclude suborbital activities from reentry 
licensing coverage simply because reentry occurs ballistically or 
through other physical forces. In the agency's view, having the 
intent to return a vehicle that has been designed to reenter Earth 
atmosphere and remain substantially intact subjects the vehicle 
operator to the agency's reentry licensing authority, as long as the 
intended point of commencement of reentry is in outer space or the 
vehicle has entered Earth orbit.
---------------------------------------------------------------------------

    Non-nominal reentries may occur in a variety of ways, including 
premature reentry, random reentry due to a major system failure, and 
reentry to an alternative or abort site. Non-nominal situations that 
are reasonably foreseeable would be considered by the agency in 
licensing a planned reentry as part of the agency's safety and risk 
mitigation program. Similarly, a finite set of outcomes and risks that 
could reasonably result from on orbit operation of an RLV in 
anticipation of its reentry would be identified and considered in 
setting risk-based insurance requirements.
    Non-nominal reentry does not necessarily mean uncontrolled reentry, 
however, although some non-nominal reentries may result in failure or 
inability of the operator to employ intended controls during the 
reentry sequence. When this situation occurs, either prematurely or at 
some time after a reentry attempt is aborted or perhaps abandoned, 
reentry may occur entirely at random, both as to time and location. For 
example, if under the terms of an FAA license, reentry of a reentry 
vehicle may only be attempted under defined circumstances (such as 
attainment by the vehicle of certain prescribed orbital 
characteristics, including attitude, system status and inclination), 
and the reentry licensee is unable to verify that it has satisfied the 
conditions necessary to conduct a licensed reentry, the licensee would 
be required to abort the reentry attempt because it cannot be 
accomplished under the safety limitations defined in the license. 
However, the reentry vehicle, which has been designed to return to 
Earth substantially intact, may reenter Earth atmosphere as a result of 
forces other than intentional initiation by the licensee of a reentry 
sequence, much like an upper stage that remains in low Earth orbit or 
an inactive satellite whose useful life is spent. The RLV industry has 
stressed to the FAA that an unplanned, uncontrolled reentry has very 
little chance of causing damage or harm because, as with most space 
debris that reenters Earth atmosphere, it would burn up due to 
atmospheric drag. The FAA believes that an event of this sort may 
result from licensed activity and is intended to be embraced by the 
agency's reentry licensing authority. The risk of such an event would 
be included in the agency's safety analysis and its consequences 
comprehended by statutory financial responsibility requirements and 
risk allocation. Alternatively, a premature reentry may occur before 
the vehicle is oriented properly for propulsion firing, making 
adherence to license terms and conditions for an authorized reentry 
impossible. Under the FAA's proposed approach to reentry licensing, the 
consequences of such an event would likewise be subject to CSLA-based 
financial responsibility and risk allocation because they would result 
from licensed activity.
    Although the FAA has proposed rigid safety requirements to ensure 
that the public is not exposed to unreasonable risk, as explained in 
the related rulemaking, RLV Licensing Regulations, the possibility 
remains that an unplanned event could occur resulting in claims for 
damage or injury in excess of risk-based insurance requirements 
analytically assessed by the agency. Congress has determined that 
indemnification shall be available for licensed reentries to provide an 
opportunity for development of this new industry. Therefore, although 
the FAA does not propose to regulate on orbit activity other than to 
assure reentry safety, the FAA proposes to license pre-descent 
activities, on orbit or otherwise in outer space, commencing at the 
point of payload deployment from an RLV, and to require insurance for 
vehicle operations while on orbit in the event of premature, errant, or 
otherwise non-nominal reentry. Inclusion of preparatory activities 
within the definition of ``reentry'' is necessary for the related 
purposes of fulfilling the FAA's safety mandate with respect to risks 
to persons and property on the ground, in airspace, and on orbit, and 
implementing a meaningful risk management program in accordance with 
the CSLA.
    The FAA has proposed this scope of coverage because the agency 
believes it is critical to the intended purpose of requiring financial 
responsibility and to the industry's acknowledged need for liability 
protection from catastrophic claims. As with licensed launch 
activities, financial responsibility benefits the United States by 
providing assured coverage for liability assumed by the government 
under the Outer Space Treaties, and specifically the Liability 
Convention, up to a required amount. Indemnification for catastrophic 
risks is critical to the success of the RLV industry because of the 
potential failure rate associated with new reentry technology.
    In proposing a comprehensive approach to reentry licensing and 
financial responsibility, the FAA also examined alternative approaches 
to ensuring appropriate risk management for reentry-related risks. For 
example, the FAA considered how claims would be covered if there were 
no license in effect. In other words, if launch authorization ended 
upon payload deployment, and reentry authorization became effective 
only at the moment of intentional ignition of reentry propulsion 
systems, would claims resulting from a premature, non-

[[Page 54455]]

nominal reentry be covered by statutory financial responsibility and 
eligible for indemnification?
    As previously noted, insurance or other form of financial 
responsibility is required to cover claims that result from an activity 
carried out under a launch or reentry license. 49 U.S.C. 70112(a)(1). 
It therefore appears from the statutory language that licensed activity 
must first occur before claims may be considered to be the result or 
consequence of that activity. Accordingly, if no license were in 
effect, claims that result from unlicensed activity following payload 
deployment and preceding the conduct of an authorized reentry would not 
be covered by statutory financial responsibility and risk allocation.
    Nor would statutory financial responsibility coverage apply to 
anything that occurs as a result of a license having been issued. If 
that were so, and if taken to the extreme, such an interpretation could 
be viewed as including manufacture of a vehicle within the scope of the 
statutory financial responsibility and allocation of risk program, an 
unintended result. Likewise, mere intent to engage in licensed activity 
would also not satisfy the statutory requirement, in the FAA's view. 
The FAA remains mindful of Committee Report language indicating 
restricted applicability of statutory risk allocation, as follows: 
``The Committee notes that these provisions (sections 70112 and 70113) 
apply to losses sustained as a result of licensed activities, (i.e., 
launches and reentries) not event or activities between launch and 
reentry; after reentry; or uncovered before launch.'' H. Rep. 105-347, 
105th Cong., 1st Sess., at 23.
    In proposing the comprehensive approach reflected here, the FAA 
also considered whether indemnification for a premature anomalous 
reentry should necessarily be regarded as causally related to launch of 
a launch vehicle. To adopt this approach, the agency would have to 
conclude that but for the launch of a launch vehicle the anomalous 
reentry would not have occurred. However, consistent with the Committee 
Report, the agency does not believe that everything that follows a 
launch bears a sufficient causal nexus to the launch to qualify for 
indemnification. By corollary, not every reentry event causing damage 
to uninvolved persons or property should be viewed as a consequence of 
the launch that placed the reentry vehicle in Earth orbit or outer 
space. For one thing, a non-nominal reentry may take place days or 
months after a nominal launch. While on orbit, or as a result of the 
space environment, the reentry vehicle's ability to reenter as planned 
and the licensee's ability to conduct an authorized reentry may be 
impaired or prevented. It may in fact be impossible to prove the exact 
cause of an anomalous reentry and there may be no demonstrable 
relationship between performance or operation of the launch vehicle and 
the reentry event. In another reasonably foreseeable situation, an 
anomalous reentry could occur proximate in time to a perfectly nominal 
launch. Even if a launch anomaly affected the reentry vehicle in some 
manner, it may be possible, or necessary, to implement on-orbit 
corrections or reenter to an alternative site consistent with the 
authorization granted by a license. Intervening events of this nature 
would or could break the causal nexus that must exist between launch 
and subsequent damage or loss, thereby defeating eligibility for 
indemnification. Finally, as in the COMET situation, although it seems 
unlikely for RLV missions, the launch of a reentry vehicle and its 
subsequent reentry may be separately contracted services performed by 
distinct operators. Where the launch vehicle operator can prove that it 
has no liability for an unplanned or unauthorized reentry by another 
operator, there would not appear to be a sufficient causal nexus 
between the launch and reentry to warrant eligibility for 
indemnification as a result of the launch.
    In light of these examples, the agency does not believe it prudent 
to inextricably tie reentry indemnification to launch. Although the 
ability of a reentry vehicle to reenter nominally may be impaired or 
degraded as a result of the natural stresses of a nominal launch or an 
anomalous situation occurring during launch, such circumstances should 
not be a necessary precondition to eligibility for indemnification in 
the event of an unplanned reentry in the FAA's view. Accordingly, the 
FAA has proposed to define reentry in a manner that accomplishes its 
safety mandate and assures meaningful risk allocation.
    As with launch indemnification, at some point the consequences of 
an unplanned reentry would be sufficiently attenuated from licensed 
activity such that indemnification would not be available to cover 
resultant claims. Under those circumstances, the licensee and other 
reentry participants would be responsible for covering the entire 
liability and should make appropriate provision for doing so in their 
risk management programs. Absent indemnification, if a reentering 
object causes damage on the ground or to aircraft in flight in another 
country, and if the United States is liable as the launching State 
under the Liability Convention, there is nothing to prevent the 
Government from seeking contribution from the responsible entity after 
covering its obligations under the Outer Space Treaties.

Suborbital RLV Financial Responsibility

    Not all RLVs are reentry vehicles under the statutory definition. 
Only those that are designed to reenter from Earth orbit or outer space 
substantially intact would qualify as a ``reentry vehicle.'' 49 U.S.C. 
70102(13). RLVs that achieve neither Earth orbit nor outer space would 
be regulated in accordance with the FAA's licensing authority over 
launches of launch vehicles in a suborbital trajectory. As explained in 
greater detail in the RLV Licensing Regulations, for the most part, the 
distinction between launch and reentry of an RLV that is a reentry 
vehicle under the statutory definition and an RLV that is not a reentry 
vehicle makes no difference from a safety perspective inasmuch as the 
FAA is proposing a mission approach to licensing RLV operations. Under 
the RLV Licensing Regulations, a consistent measure of safety would 
apply to all RLV missions, whether the proposed activity would be 
subject to the agency's licensing authority over both launch and 
reentry or only its licensing authority over suborbital launches. 
Accordingly, if what goes up will come down, either by operational 
design or the laws of physics, the agency would not authorize the 
mission unless it concludes, in advance of the launch, that both ascent 
and descent of the vehicle may be accomplished in a manner that does 
not expose the public to unreasonable risk.
    From a financial responsibility and risk management perspective, 
however, there is a difference between suborbital RLVs that are also 
reentry vehicles and those that are not. Where a suborbital RLV enters 
outer space, its launch and reentry would be subject to separate and 
distinct MPL determinations based upon the unique risks posed during 
each flight phase, although the FAA reserves discretion to impose a 
uniform requirement throughout licensed flight. Suborbitally operated 
RLVs that do not achieve outer space would be subject to a single 
determination of financial responsibility only, issued under 14 CFR 
part 440. The FAA requests public comment on this proposed distinction 
in financial responsibility requirements.

[[Page 54456]]

Reentry Vehicle Financial Responsibility

    Not all reentry vehicle operations will be performed by RLVs. A 
COMET-type reentry vehicle may be developed for purposes of operating 
in space and subsequent reentry. The Committee Report is particularly 
instructive regarding the extent of FAA licensing authority over launch 
and reentry of a reentry vehicle that is not an RLV, such as the COMET/
METEOR. The COMET/METEOR reentry vehicle was intended to remain on 
orbit for 30 days before its reentry would be initiated, unlike the 
rapid turn-around concepts currently under development for RLVs. FAA 
reentry licensing would be required to authorize reentry of such 
vehicles but not its on orbit operation, consistent with the Committee 
Report, and risk allocation under the CSLA would be similarly 
restricted to its launch and reentry and would not cover events or 
activities between launch and reentry.
    Reentry of reentry vehicles that are not RLVs, like COMET/METEOR, 
may occur significantly after a launch has been concluded and 
unlicensed on orbit operations have occurred. Operators of reentry 
vehicles designed to perform on orbit operations and maneuvers 
independent of launch and reentry would not have the benefit of 
seamless financial responsibility coverage under the CSLA and must be 
prepared to manage liability risk entirely through private insurance. 
Similarly, claims that result from unlicensed activity on orbit would 
not be eligible for indemnification under the CSLA and therefore remain 
the ultimate responsibility of the operator and participants in such 
activities.9 The Committee Report suggests that reentry 
licensing coverage would commence for such vehicles when they are 
prepared specifically for reentry, such as when attitude is oriented 
for propulsion firing to place a vehicle on its reentry trajectory. Id. 
at 21. For purposes of ensuring meaningful implementation of the 
statutory financial responsibility and risk allocation regime, comments 
are requested on the appropriate commencement point of licensed 
activities for reentry vehicles that are not RLVs.
---------------------------------------------------------------------------

    \9\ The United States accepts fault-based liability as a 
launching State under the Liability Convention for damage to another 
launching State's on orbit space object if the damage is the fault 
of the government or persons for whom the United States is 
responsible. Liability Convention, Article III. Absent a clear 
causal nexus to a licensed launch or reentry, statutory risk 
allocation provisions, including indemnification, would not apply to 
cover liability of launch or reentry participants to third parties 
for on orbit damage. Where the statute does not apply, the 
government may fulfill its treaty obligations and seek contribution 
from those entities at fault for the damage.
---------------------------------------------------------------------------

Section-by-Section Analysis

    The FAA proposes to issue financial responsibility regulations for 
licensed reentry activities in a form that, for the most part, 
parallels regulations governing financial responsibility for licensed 
launch activities (14 CFR part 440 or part 440). The reason for doing 
so is practicality, not expediency. Principles of fairness, logic and 
consistency suggest that the FAA attach financial responsibility and 
risk allocation requirements to reentry, including the descent phase of 
an RLV mission, in a manner consistent with that applied to launches. 
For purposes of soliciting public comment on reentry financial 
responsibility, the FAA proposes a new part substantially mirroring 
part 440 requirements instead of adding reentry coverage to part 440. 
The FAA reserves discretion to merge the two parts in a final rule, 
however. Doing so would not represent a substantive change from the 
proposed approach and would not result in a second comment period.
    The FAA also will reserve discretion to establish uniform launch 
and reentry financial responsibility requirements for an authorized RLV 
mission and separate insurance requirements for launch as distinct from 
reentry when a basis for doing so is identified. Factors that may make 
it appropriate to distinguish launch risk from reentry risk for 
financial responsibility purposes include disparity between launch and 
reentry MPL values, different vehicle operators for launch and reentry, 
and sufficient separation between launch and reentry functions such 
that risks are sufficiently independent of one another for risk 
management and insurance purposes. Launch MPL may be vastly different 
from reentry MPL if, for example, the launch site is in an unpopulated 
area with no population overflight contemplated and return to the 
designated reentry site involves some population overflight, or if 
launch risks include significant explosive potential while reentry 
risks involve very little risk of break up or explosion, or if launch 
involves toxic propellants and reentry would occur with little or no 
propellant remaining on board the vehicle.
    To facilitate the FAA's ability to impose either uniform insurance 
requirements for all flight phases of an RLV mission or differentiated 
requirements to correspond to flight phase risks, the FAA finds it 
prudent to propose reentry financial responsibility requirements 
parallel in structure to those contained in 14 CFR part 440. Although 
launch and reentry insurance requirements may, under certain 
circumstances, be differentiated in the license, the FAA reiterates 
that a single license is envisioned combining the launch and reentry 
authorizations required for the conduct of an RLV mission.
    By proposing a new part 450, the FAA intends to apply to reentry 
the principles of financial responsibility and risk allocation 
established in 14 CFR part 440. The interested public is directed to 
the rulemaking activity associated with issuance of final rules 
governing financial responsibility for licensed launch activities for 
discussion and thorough analysis by the FAA of those principles. See 
Notice of Proposed Rulemaking (NPRM), Financial Responsibility 
Requirements for Licensed Launch Activities, 61 FR 38992-39021, issued 
July 25, 1996, and Final Rule, 63 FR 45992-45625, issued August 26, 
1998 (referred to herein as part 440 Final Rule). Both documents are 
available by accessing the FAA's web site at http://www.ast.faa.gov. 
Persons unfamiliar with requirements for liability insurance coverage, 
reciprocal waivers of claims, and distinctions established by the FAA 
between private party launch participants (PPLPs), Government launch 
participants (GLPs), and the employees of each, involved in licensed 
activities, among other things, should refer to the part 440 rulemaking 
in assessing this proposal and submitting comments.
    Highlighted in the discussion below are the unique characteristics 
of financial responsibility and risk allocation when considered in the 
context of a licensed reentry or RLV mission.

Section 450.1--Scope of Part; Basis

    Section 450.1 identifies authorized reentry activities as the 
subject of the notice. A licensed operator of a reusable launch vehicle 
subject to the FAA's reentry licensing authority would be subject to 
financial responsibility requirements covering launch and reentry and 
must therefore satisfy both part 440 and part 450 requirements. These 
requirements may be combined in a single license order.

Section 450.3--Definitions

    Section 450.3 proposes to define regulatory terms in a manner 
consistent with 14 CFR part 440.
    Certain terms defined in 14 CFR 440.3 refer to entities or persons 
involved in licensed launch activities or launch services for such 
activities. Persons or

[[Page 54457]]

entities involved in licensed launch activities or launch services are 
identified as such in Sec. 440.3 ``definitions'' because they obtain a 
certain status under the part 440 regulations, including that of 
additional insured or participant in the reciprocal waiver of claims 
agreement required for licensed launch activities. Where a licensed 
reentry will follow a licensed launch, as in the conduct of an RLV 
mission that achieves Earth orbit or outer space, the FAA believes that 
persons and entities involved in either flight phase may be potential 
defendants in the event of third-party claims for injury, damage or 
loss, arising out of the mission, regardless of when the claim arises. 
That is, participants in the launch phase may be potential defendants 
in the event of claims resulting from an errant reentry and insurance 
covering their liability exposure to third parties must also be 
provided. Similarly, claims for damage or loss may arise among launch 
and reentry participants and a comprehensive inter-party waiver of 
claims encompassing launch and reentry participants is proposed in this 
notice to minimize the universe of claims for which CSLA-based 
insurance must be provided. Accordingly, the proposed regulations are 
designed to ensure that participants in all licensed mission flight are 
included within the intended embrace of financial responsibility and 
allocation of risk requirements during launch or ascent as well as 
reentry or descent. Because launch and reentry licensees for any 
particular mission are expected to be the same entity for the 
foreseeable future, this approach should be non-controversial and easy 
to implement.
    Theoretically, any private party that is sufficiently involved as 
to be a named defendant in the event of litigation arising out of loss 
or damage to third parties would be comprehended by required coverage 
as a ``licensee,'' ``customer'' or ``contractor or subcontractor.'' To 
ensure this result, the FAA proposes to make explicit requirements for 
extending reentry coverage to participants involved in associated 
launch activities.
    The definition of ``contractors and subcontractors'' in part 440 is 
already sufficiently broad as to comprehend entities and persons 
involved in licensed reentry other than a customer or the government 
and its agencies because it includes suppliers of property, services 
and component manufacturers of a launch vehicle or payload. However, 
unless made explicit, it is not sufficiently clear that contractors 
involved in licensed reentry activity would necessarily include 
contractors involved in a licensed launch. The proposed definition in 
Sec. 450.3(a)(2) therefore includes contractors and subcontractors 
involved in licensed launch activity associated with a particular 
reentry. Reference to contractors and subcontractors throughout the 
regulatory text is therefore intended to include those entities 
involved in licensed launch activities related to a reentry. The FAA 
understands that this reference may not be obvious to persons 
unaccustomed to FAA regulations and has endeavored to include specific 
reference to such entities for purposes of facilitating public comment 
on the proposal.
    The term ``customer,'' as proposed, would also include a launch 
services customer as this entity may also confront liability exposure 
and is at risk of inter-party litigation by virtue of having procured 
launch vehicle services.
    The term ``Government personnel'' is likewise similar to that 
contained in 14 CFR 440.3(a)(6), except that, for the reasons set forth 
above, it would also cover employees of the United States, its 
agencies, and its contractors and subcontractors involved in licensed 
launch activities associated with a particular reentry.
    The term ``third party'' has been discussed at great length in the 
part 440 Final Rule. The interested public is referred to the 
discussion in 63 FR at 45597-98, and 45603-07. Under the approach 
outlined immediately above, involvement in either the launch or reentry 
phase of flight removes an entity, but not its employees, from the 
``third party'' classification. Consistent with the part 440 definition 
of ``third party,'' employees of such entities are third parties; 
however, claims of employees of private party participants in a 
licensed reentry are intended to be addressed through reciprocal waiver 
of claims agreements and their employer's assumption of responsibility 
for such claims, as described below in the discussion of proposed 
Sec. 450.17. Hence, such claims would not be covered claims for which 
liability insurance is required under this proposal. However, as 
explained in the part 440 Final Rule, claims of Government personnel, a 
defined term, must be covered by the licensee's liability insurance up 
to the required limit.
    With the development of RLV technology comes the possibility of 
crewed or piloted launch vehicles whose operations would be subject to 
FAA licensing. For purposes of financial responsibility and risk 
allocation, the FAA regards the crew of a launch vehicle as employees 
of a private party launch or reentry participant (PPLP or PPRP, 
respectively) and therefore financial responsibility for their claims 
for damage, injury or loss would be addressed through reciprocal waiver 
of claims the same as claims of other PPLP or PPRP employees.
    One additional class of persons not previously considered involves 
passengers who may, in the future, buy a ride on an RLV. The allure of 
space tourism is growing in popularity and the agency anticipates 
receiving launch and reentry licensing proposals for passenger-carrying 
space vehicles. Although it is premature to establish official FAA 
policy on the nature of the regulatory program that would be required 
to address passenger safety issues in space, the FAA is interested in 
the public's views on the subject and, for purposes of a future 
rulemaking, how passenger risk should be allocated. For example, should 
passengers be regarded as any other customers who are expected to waive 
claims against other participants for injury, damage or loss as a 
result of launch or reentry? Should the Government play a role in 
establishing limits on liability for injury to space vehicle 
passengers? Should indemnification be extended to cover risks of 
liability to passengers?

Section 450.5--General

    The conduct of authorized reentry activities would be subject to 
compliance by the licensee with financial responsibility and risk 
allocation requirements. Proposed Sec. 450.5(a) would establish in a 
regulation that compliance with part 450 requirements is a prerequisite 
to the conduct of a licensed launch involving a reentry as well as a 
licensed reentry.
    Section 450.5(b) reflects the FAA's intent to continue its current 
practice of establishing required amounts of insurance in license 
orders, reserving the right to make necessary modifications to those 
requirements prior to reentry.
    The FAA's need for flexibility in setting insurance amounts is 
intended to address changes in liability and property risks that may 
occur over the multi-year life of an operator license, or if more 
specific performance data is learned about a vehicle's performance over 
time to warrant reassessment of failure consequences. It is not 
intended as a means of shifting risk from the government to industry 
after vehicle flight has been initiated.
    A parallel requirement to that proposed in Sec. 450.5(b) appears in 
14 CFR 440.5(b) and prompted industry concern that the FAA would vary

[[Page 54458]]

requirements mid-flight. Such concerns are unfounded. The FAA intends 
to issue and require compliance with reentry insurance requirements 
before launch of a reentry vehicle occurs. The FAA does not envision 
changed requirements once launch of an RLV or reentry vehicle occurs 
but before its reentry is initiated. The agency is aware that it would 
probably be difficult at best or prohibitively costly to obtain greater 
insurance coverage for reentry in the event of a launch anomaly or on-
orbit situation that may affect reentry accuracy. Under either 
scenario, either the FAA or the licensee operating under its own 
procedures, may determine that a reentry attempt must be aborted on 
orbit if a significant threat to public safety is presented after 
launch of the reentry vehicle is completed, as defined in licensing 
regulations. A launch or on orbit failure affecting reentry risk is a 
reasonably foreseeable event and would be addressed through the 
agency's risk-based methodology for establishing insurance 
requirements.
    As with launch financial responsibility, Sec. 450.5(c) establishes 
that a reentry licensee remains responsible for liability, loss or 
damage sustained by the United States, even if the licensee has made an 
adequate demonstration of coverage under part 450, subject to four 
specific exceptions. The four exceptions are as follows: (1) Liability, 
loss or damage sustained by the United States results from willful 
misconduct by the United States or its agents; (2) covered third-party 
claims, as explained in greater detail in the discussion of proposed 
Sec. 450.9, arising out of any particular reentry exceed the amount of 
required insurance and do not exceed $1.5 billion (as adjusted for 
post-January 1, 1989 inflation) above that amount and are payable under 
49 U.S.C. 70113 and part 450; (3) loss or damage to government property 
covered under Sec. 450.9(e) exceeds the required amount of insurance 
and does not result from willful misconduct of the licensee; and (4) in 
the event the licensee has no legal liability for claims that exceed 
required insurance under Sec. 450.9(c) plus $1.5 billion (as adjusted 
for post-January 1, 1989 inflation).
    In proposing regulations that parallel Sec. 440.5(c) of part 440, 
the FAA continues to hold the licensee responsible for reentry-related 
liability within the third tier of risk, that is, liability in excess 
of the amount of risk-based insurance established by the agency plus 
the amount of indemnification that would be available under 49 U.S.C. 
70113 if Congress appropriates funds for that purpose. Industry 
concerns over regulatory assignment of liability were registered and 
responded to by the agency in the rulemaking covering financial 
responsibility for licensed launch activities. See part 440 Final Rule, 
63 FR 45592, Aug. 26, 1998. The FAA continues to maintain that the 
Government must have a responsible party that it can look to in the 
event the Government is confronted with catastrophic liability under 
the Outer Space Treaties and believes that it is reasonable to require 
participants in launch and reentry activities to absorb the cost of 
obtaining additional coverage for the third tier of risk. Such costs 
may be distributed among launch and reentry participants, including 
customers.
    Section 450.5(d) reflects the FAA's regulatory policy that failure 
to comply with part 450 requirements can result in license suspension 
or revocation as well as civil penalty enforcement action.

Section 450.7--Determination of Maximum Probable Loss

    Section 450.7 would extend, in regulations, application of maximum 
probable loss methodology to licensed reentry activities. The NPRM on 
Financial Responsibility for Licensed Launch Activities, 61 FR 38992-
39021, describes in extensive detail the assumptions and risk 
assessment tools employed by the FAA in calculating the maximum 
probable loss or MPL that may reasonably be expected to result from a 
licensed launch. Persons interested in MPL methodology are referred to 
the NPRM, 61 FR at 39004-39007. Because a similar approach to reentry 
MPL would be utilized by the agency that explanation is not repeated 
here.
    In summary, MPL establishes in a dollar amount the value of the 
maximum magnitude of loss for bodily injury or property damage that is 
sufficiently probable to warrant financial responsibility protection as 
a regulatory matter. Separate MPL studies are conducted for government 
property loss or damage and for third-party injury, loss or damage 
inclusive of government personnel as defined in Sec. 450.3 but not 
inclusive of employees of other participants in licensed activity.
    The FAA proposes to use the same probability thresholds of 
occurrence for reentry as currently apply to launch failure and 
accident scenarios and would establish insurance requirements for 
consequences falling within those threshold probabilities. They are 
defined in Sec. 450.3(11).
    A study conducted by the agency and issued in May 1995 confirms 
that use of the FAA's MPL methodology in assessing launch risk is 
appropriate for reentry and that the threshold probabilities of 
occurrence used for launch MPL would be appropriate in determining 
reentry MPL. The study, entitled ``Financial Responsibility for Reentry 
Vehicle Operations,'' considered a COMET or METEOR capsule-type of 
reentry vehicle, as opposed to a reusable launch vehicle; however, the 
FAA concludes the study's findings remain equally applicable to RLV 
technologies currently under the agency's consideration. In fact, 
enhanced maneuverability and controllability of RLVs may result in 
lower MPL determinations because of tighter landing footprints and the 
ability to compensate for errors introduced due to wind and 
environmental factors, among other things. The study is available on 
the FAA/AST home page.
    An interesting observation made in the study indicates that if an 
MPL determination is extremely high in dollar value it may signal that 
the proposed activity is too risky from a public safety perspective to 
be authorized by the FAA and that additional risk mitigation measures 
may be necessary to ensure risks to the public are appropriately 
managed.
    Contrary to current thinking, the study also assumed that because 
an uncontrolled reentry would not be an authorized event it was outside 
the scope of the MPL determination. Nevertheless, it did forecast 
(properly) that a reentry would not be attempted unless a determination 
had been made that the reentry vehicle would land within its designated 
landing site at a predetermined probability level. The FAA is planning 
to impose regulatory controls that minimize the probability of a random 
reentry and would examine a range of failure and accident scenarios, 
including any major system failures that fall within the threshold 
probability of occurrence, that may cause a reentry to be uncontrolled 
or essentially random. Accordingly, the FAA believes that application 
of MPL methodology to reentry will result in insurance requirements 
that adequately account for maximum probable reentry risks.
    With respect to government property considerations in determining 
MPL, the NPRM on Financial Responsibility for Licensed Launch 
Activities (61 FR 38992, July 25, 1996) provides an elaborate 
discussion regarding the nature and extent of property that must be 
covered by government property insurance for loss or damage. In 
essence, all property of the government, and its contractors and 
subcontractors who are involved in launch or reentry services for a 
particular launch or reentry, at a

[[Page 54459]]

Federal range facility must be covered in the event of loss or damage. 
Government range property includes that which is located on an adjacent 
Federal range facility. Government property located off the Federal 
range facility is considered third party property because risks to such 
property are no greater than risk exposure of other unrelated off-site 
property. A licensee's liability policy is expected to respond to 
government claims for property loss or damage to property located off 
of a Federal range unless the property is involved in the licensed 
activity and has been specifically identified in a license as covered 
government property for purposes of government property insurance 
coverage.
    Government property concerns may be less paramount for reentry than 
they are currently for launch because of potential use of non-Federal 
sites for reentry. Growing interest in RLV development has been matched 
by the number of non-Federal entities interested in offering authorized 
sites that could support RLV launch and recovery operations. The extent 
to which RLV developers would rely upon the safety services and 
facilities of Federal ranges to support vehicle reentry and recovery is 
not yet known, nor is the willingness of Federal range facilities to 
allow unproven reentry vehicles to land on their property. To the 
extent government range or other test assets are identified as being at 
risk as a result of a licensed reentry, the FAA would require 
government property insurance. However, the agency envisions that 
reentry sites may be located on private or state-owned land and that 
there may be no government property insurance requirement associated 
with a particular reentry license.
    MPL methodology would be used to establish third-party liability 
insurance requirements for licensed reentry activities. The assessment 
would not take into account injury, damage or loss to those 
nongovernment-related entities participating in licensed reentry 
activities (private party reentry participants or PPRPs), including 
employees of those entities. Nor would it take into account injury, 
damage or loss to nongovernment-related entities involved in the 
licensed launch (private party launch participants or PPLPs) that is 
associated with or preceded the reentry because, as indicated above, 
their participation in the launch makes them sufficiently involved in a 
subsequent reentry as to warrant insurance coverage for their resultant 
liability to third parties and their participation in the reciprocal 
waiver scheme. As a general matter, entities participating in licensed 
flight would either be within the scope of required financial 
responsibility coverage as involved parties or outside of it as third 
parties, for the duration of the mission. With RLV activities, in 
particular, it seems difficult and probably undesirable to attempt to 
sever or partition, for purposes of insurance and liability, the 
different entities from launch or reentry risks. However, consistent 
with 14 CFR Part 440, Government personnel, defined as employees of the 
United States and its contractors and subcontractors, involved in 
launch or reentry services for licensed activities, are in a unique 
position inasmuch as they are additional insureds under the required 
liability insurance and are also potential claimants against the 
liability policy in the event they suffer personal injury, damage or 
loss.
    Section 450.7(a), as proposed, provides that the MPL determination 
forms the basis of financial responsibility requirements imposed on a 
reentry licensee in a license order.
    Consistent with 49 U.S.C. 70112(c), Sec. 450.7(b) identifies the 
90-day period in which the FAA is required to issue an MPL 
determination after all information required of the licensee is 
submitted to the FAA. As applied to launch licenses, the agency has 
experienced significant impediments to its ability to comply with the 
90-day requirement because of the time required to obtain information 
from other Federal agencies and then to coordinate the results of the 
MPL analysis with those agencies. Factors beyond the FAA's control may 
affect timely issuance of an MPL determination; however, the agency 
will keep licensees or applicants informed of its progress and 
anticipated delays.
    Section 450.7(c) directs applicants to Appendix A, where 
information requirements to support an MPL determination for licensed 
reentry activities are located. It also presents a procedural mechanism 
whereby a person requesting an MPL determination can certify the 
continuing accuracy and applicability of previously provided 
information instead of resubmitting data. Changes in data must be 
reported to the FAA to ensure the continuing validity of an MPL 
determination.
    Prospective reentry licensees contemplate RLVs having rapid turn-
around times. RLV developers have urged the agency not to impose 
regulatory obstacles, such as reissuance of MPL and insurance 
requirements between missions, to their goal of quick re-deployment. 
The FAA intends to work with prospective licensees to ensure their 
concerns regarding regulatory impediments do not materialize. One 
solution may be to suggest to applicants that they propose multiple 
reentry sites in applications so that a change in future reentry plans 
does not necessitate an additional review period, either for safety or 
MPL determination purposes. Of course, this approach requires much more 
extensive data submissions on the part of an applicant and may also 
slow down the review process for the agency in that it would have 
additional safety and risk considerations to evaluate. The FAA also 
intends to continue use of its operator license concept once an 
applicant demonstrates its qualifications and doing so should also 
facilitate the planned frequency of launch and reentry services 
envisioned by the industry.
    Section 450.7(d) provides that the FAA would amend its MPL 
determination before completion of licensed activity if new information 
so indicates. As with amendment of financial responsibility 
requirements in general, this provision is not intended to allow the 
agency to alter requirements mid-flight. Rather, it provides notice to 
licensees that requirements may be changed, raised or lowered, when the 
FAA determines it is appropriate to do so on the basis of additional 
information learned by the agency. Insurance requirements that 
accompany an operator license are intended to remain in force for the 
life of the license, proposed as a two-year renewable term in the RLV 
Licensing Regulations. Section 450.7(d) provides notice that such 
requirements may change during the life of the license to reflect 
changes in risk or values.
    Persons other than prospective reentry licensees may request an MPL 
determination for their activity and the FAA would like to accommodate 
requests for advisory MPL determinations, as reflected in proposed 
Sec. 450.7(e). For example, a reentry site operator may request a 
determination. An existing reentry licensee may be contemplating a 
change in operations or its designated reentry site but would be 
unwilling to formalize its plans in a license amendment application 
until it knows whether those changes would significantly alter its 
insurance obligations and possibly its costs. Because priority would be 
given to actual license applications, no time limit is provided in 
which the agency must comply with a request for an MPL determination 
that is advisory in nature.

[[Page 54460]]

Section 450.9--Insurance Requirements for Licensed Reentry Activities

    Proposed Sec. 450.9 sets forth the two types of insurance a 
licensee could be required to obtain as a condition of its reentry 
license. Government property insurance would be required if government 
range or test assets would be sufficiently exposed to risk of damage or 
loss as a result of reentry activities. As a general matter, liability 
insurance would always be required to provide coverage to participants 
in licensed reentry activities, including licensed launch activities 
associated with a reentry, in the event of their legal liability to 
third parties, including Government personnel, for injury, damage or 
loss. Claims of employees of participants other than the government and 
its involved contractors and subcontractors are the responsibility of 
their employer, as explained in greater detail under the discussion of 
proposed Sec. 450.17, and are not considered in the determination by 
the FAA of the amount of liability insurance that must be available to 
cover third party claims.
    Section 450.9(a) provides that compliance with insurance 
requirements or other demonstration of financial responsibility is a 
requirement of a reentry license.
    As directed by 49 U.S.C. 70112(a)(4), additional insureds covered 
by insurance are identified in proposed Sec. 450.9(b). For a licensed 
reentry, the FAA would also require that additional insureds include 
persons and entities involved in any launch that is associated with a 
particular reentry because they, too, risk liability exposure as a 
result of their participation in licensed flight in the event of third-
party loss or damage.
    Proposed Sec. 450.9(c) establishes that the amount of required 
liability insurance for covered third party claims is based upon the 
FAA's MPL determination. The amount of insurance that may be required 
is limited by statute to the lesser of $500 million or the maximum 
available on the world market at reasonable cost. The determination of 
reasonable cost is assigned by regulation to the FAA. Covered third 
party claims include claims of employees of the government and its 
contractors and subcontractors. Covered third party claims exclude 
claims of employees of other participants in a licensed reentry event 
or RLV mission (PPRPs), including employees of entities involved in a 
licensed launch (PPLPs) associated with a particular reentry. Loss or 
damage to government property and that of government contractors and 
subcontractors other than that for which government property insurance 
is required under Sec. 450.9(d) would also be a covered claim under the 
liability insurance requirement. For example, a licensed reentry to the 
designated reentry site of Vandenberg Air Force Base would include, as 
a condition of the license, insurance covering loss or damage to 
government property located on Vandenberg Air Force Base. However, if 
the reentry vehicle misses the targeted landing point and impacts the 
U.S. Post Office in nearby Lompoc, California, the liability policy 
would be required to respond to the claim.
    Requirements for government property insurance are proposed in 
Sec. 450.9(d). It provides that claims by the United States, its 
agencies, and its contractors and subcontractors involved in licensed 
reentry activities, for property damage or loss at a Federal range 
facility that results from the licensed activity must be covered, 
absent willful misconduct by the government or its agents causing such 
damage or loss. Damage caused by a government contractor or employee 
must be covered by the policy. A detailed explanation of the status of 
government contractors and subcontractors appears in the supplementary 
information accompanying the part 440 Final Rule (63 FR 45592, Aug. 26, 
1998) and the reader is referred to that document for further 
information. Government property at a Federal range facility includes 
property located at an adjacent Federal range facility. Cape Canaveral 
Air Station and Kennedy Space Center are an example of adjacent Federal 
range facilities.
    Section 450.9(e) indicates that Government property insurance 
requirements are based upon MPL and are capped by statute at the lesser 
of $100 million or the maximum available on the world market. The 
regulation would leave the determination of reasonable cost to the 
agency.
    The CSLA allows licensees to demonstrate financial responsibility 
in a manner other than insurance; however, the FAA's experience is that 
insurance is the unanimously preferred choice. Where a reentry licensee 
opts to use another method of demonstrating financial responsibility, 
the FAA would require a detailed explanation of its adequacy, as 
indicated in proposed Sec. 450.9(f).

Section 450.11--Duration of Coverage; Modifications

    The required duration of insurance coverage must be sufficiently 
broad as to cover anomalous situations that result from planned 
reentries. Anomalous situations may include premature reentry, delayed 
reentry or reentry to a contingency abort location. Accordingly, to 
satisfy statutory objectives, the FAA believes that it is necessary and 
appropriate to require that insurance coverage be available to respond 
to reentry-related claims, including those that arise before 
intentional initiation of reentry or descent flight of a reentry 
vehicle.
    Licensed reentry activities, and as a practical matter licensed 
launch activities associated with a reentry, may not commence without 
demonstration by the licensee of financial responsibility. Consistent 
with the scope of a reentry license, insurance must be in effect any 
time licensed reentry activity takes place, including the conduct of 
on-orbit reentry readiness procedures and system checks, and remain in 
place to cover claims resulting from an errant or aborted reentry.
    Under part 440 requirements, for orbital launches, launch insurance 
must remain in effect until the later of 30 days following payload 
separation or ignition of the vehicle. 14 CFR 440.11(a). As a practical 
matter, therefore, to the extent a reentry anomaly is proximately 
caused by a licensed launch, insurance would exist under part 440 to 
cover its consequences. However, reentry anomalies may occur wholly 
independent of a launch, as previously illustrated in examples. A 
reentry anomaly could occur after a nominal launch and, absent a causal 
relationship to the launch, may not be covered by launch insurance 
unless reentry risks are also specifically included in the policy. 
Also, some reentry activities may be planned to take place long after a 
launch has been concluded, as was the case for the COMET/METEOR 
Program. In such cases, insurance must be available to respond to 
reentry-related claims that are wholly distinct from launch-related 
events.
    The FAA proposes to require that reentry insurance remain in place 
for a period of 30 days following initiation of reentry flight, with a 
caveat. A reentry may be aborted, leaving a vehicle remaining on orbit 
where it could pose risk to other space objects or reenter at some 
future time. A reentry vehicle that remains on orbit as a result of an 
aborted reentry may enter Earth atmosphere due to forces of natural 
orbital decay and cause harm on the surface of the Earth. It is 
difficult to predict, as a general matter, when such a ``natural 
reentry'' will occur, and in any event, it is possible that the vehicle

[[Page 54461]]

would burn up when it enters Earth atmosphere due to atmospheric drag 
effects or risk mitigation measures imposed as a condition of a reentry 
license.
    However, reentry vehicles would be designed to withstand the rigors 
of reentry, at least under nominal circumstances, and therefore the FAA 
does not equate the risks associated with random reentry of a reentry 
vehicle with those associated with an expendable launch vehicle upper 
stage that enters Earth atmosphere. In the latter case, it is probable 
that the vehicle stage would burn up, although an exceptional case may 
occur, such as the fuel tank of a Delta II vehicle that entered Earth 
atmosphere through orbital decay several years ago and landed 
substantially intact. Risks of intact reentry presented by a random 
reentry of a reentry vehicle would be assessed by the FAA as part of 
the risk assessment performed to determine whether a reentry mission 
may be licensed. As a result of that assessment, the FAA believes it 
would be able to determine the point in time at which reentry risks are 
sufficiently small such that financial responsibility requirements 
would no longer be necessary. Accordingly, the FAA proposes to assess 
duration of insurance requirements for abort to orbit situations 
through a risk-based assessment that indicates when demonstrable risk 
from a random reentry is no longer of sufficient consequence as to 
require insurance coverage. A similar approach is used under 14 CFR 
440.11(a)(3) in establishing duration of insurance for suborbital 
launches. As is true for launch, indemnification would be available 
from the first dollar of loss when insurance is no longer required, 
assuming other eligibility requirements are satisfied. Therefore, 
unlike part 440 requirements for orbital launches, the agency is not 
proposing a finite duration of insurance measured from a planned event, 
whether or not that event occurs nominally or non-nominally.
    The FAA believes that its proposed approach is particularly prudent 
and necessary to cover the government's liability under the Outer Space 
Treaties, particularly the Liability Convention. Under the Liability 
Convention, the Government remains strictly liable for damage on the 
ground caused by its space object when it is a launching state.
    Under proposed Sec. 450.11(b), the FAA continues its current 
practice of prohibiting changes in insurance coverage, including 
cancellation, without 30 days notice to the FAA and approval by the 
agency. The FAA understands that insurers retain certain rights of 
cancellation in their policies; however, insurance may not be cancelled 
once licensed activities have commenced until the required duration of 
insurance has expired. This requirement is particularly important where 
an on orbit abort occurs and insurance would be required to remain in 
effect for a significant length of time.
    Comments are requested on the FAA's proposed approach to ensuring 
financial responsibility for foreseeable reentry risks.

Section 450.13--Standard Conditions of Insurance Coverage

    The FAA is proposing that insurance policies satisfy the same terms 
and conditions for reentry as apply to insurance policies obtained in 
conformance with part 440 requirements. The interested public is 
referred to the NPRM on Financial Responsibility Requirements for 
Licensed Launch Activities and the part 440 Final Rule for a detailed 
explanation of proposed terms. (See 61 FR at 39009-10 and 63 FR at 
45614, respectively.)
    Section 450.13(a)(2), as proposed, would continue the current 
practice of requiring that policy limits apply on a per occurrence 
basis.10 This requirement has not been controversial nor has 
it presented difficulties in terms of industry ability to comply, to 
the agency's knowledge. As a practical matter, an accident that causes 
substantial liability or government property damage during preparatory 
operations at a launch site is probably one that also causes extensive 
damage to the launch vehicle, thereby terminating that particular 
launch. An accident that causes substantial liability or government 
property damage during flight of the vehicle is also one that 
terminates the launch. Accordingly, requiring coverage for the 
aggregate of claims on a per occurrence basis has not strained 
insurance capacity or raised concerns among underwriters.
---------------------------------------------------------------------------

    \10\ Financial responsibility requirements for licensed launch 
activities provide that insurance policy limits must apply 
separately to each occurrence, and that for each occurrence, policy 
limits must apply to the total of claims arising out of the licensed 
activity in connection with any particular launch. 14 CFR 
440.13(a)(2).
---------------------------------------------------------------------------

    At the October 1998 meeting of the Risk Management Working Group 
(RMWG) of the FAA's Commercial Space Transportation Advisory Committee 
or COMSTAC, one insurance broker noted that RLV missions present 
underwriting difficulties that do not exist in underwriting ELV risks. 
Unlike ELV missions, RLVs present opportunities for multiple 
occurrences during a single mission, even if one or more flight phases 
are accomplished successfully. For example, Kistler Aerospace 
Corporation utilizes a two-stage launch technology. The first stage 
separates and is intended to return to the launch site, while the 
second stage continues to orbit, enters Earth orbit, and approximately 
24 hours later returns to a reentry site on Earth. A covered occurrence 
could take place as a result of return of the first stage to the launch 
site, anomalous payload deployment by the Kistler vehicle, and upon 
final reentry to the designated reentry site. Thus, a combination of 
occurrences could result in claims in excess of the aggregate limits of 
the policy, assuming a single policy covering launch and reentry is 
obtained for the entire mission. According to the broker, underwriters 
have expressed unwillingness to insure the uncapped liability which 
could result from requiring coverage on a per occurrence basis.
    The FAA proposes to separate launch from reentry risk in 
prescribing financial responsibility for a single RLV mission. Doing so 
may have the added benefit of limiting the combination of occurrences 
that may take place during a particular flight phase and the amount of 
financial responsibility required to cover all such occurrences. MPL 
methodology would take into account the probability of multiple 
occurrences during a single flight phase and would reflect the 
aggregate value of losses that may result during each phase if multiple 
events are found to be sufficiently probable. Another possible approach 
to RLV mission financial responsibility may lead the FAA to aggregate 
its MPL determinations for each flight phase into an aggregate value 
that must be insured for the duration of an RLV mission, thereby 
capping liability limits of insurance, albeit at a potentially high 
level (although it cannot exceed $500 million or the amount available 
on the world market at reasonable rates for launch and for reentry). 
The FAA seeks public comment on possible solutions that would ensure 
adequate coverage is provided while not depleting insurance market 
capacity. In commenting on this issue, the public is reminded that 
under the statute, the RLV industry is expected to cover launch risk up 
to the maximum allowable MPL, as well as reentry risk up to the same 
amount. The FAA's proposed mission approach to licensing RLVs is not 
intended to increase financial risk to the government.
    Consistent with part 440 requirements, proposed Sec. 450.13(a)(5) 
would require that exclusions from

[[Page 54462]]

coverage be specified in insurance certificates submitted to the FAA as 
evidence of compliance with financial responsibility. Claims resulting 
from excluded risks that are ``usual'' are eligible for indemnification 
under the terms of 49 U.S.C. 70113 from the first dollar of loss, under 
procedures set forth in proposed Sec. 450.19. Accordingly, the FAA 
requests information, in advance of the first licensed reentry, 
concerning the kinds of risks for which insurance is not commercially 
available at reasonable rates. A complete discussion of ``usual'' 
exclusions and the FAA's approach to addressing such exclusions is 
found in the part 440 Final Rule at 63 FR 45617.
    Section 450.13(a)(8) appears different from its companion 
requirement for licensed launch activities, 14 CFR 440.13(a)(8). It 
addresses certain qualifications of insurers under these requirements.
    Following issuance of final rules governing financial 
responsibility for licensed launch activities, the agency learned that 
a great many insurers involved in insuring aviation and aerospace risks 
are not licensed to do business in any State, territory, possession of 
the United States, or the District of Columbia, as stipulated in 
Sec. 440.13(a)(8). The reason for this requirement is to assure that 
additional insureds under a policy can enforce legal rights against the 
insurer within the United States. It is not intended as a protectionist 
device to restrict or impede access to overseas insurance markets. The 
FAA has issued an Advisory Circular, AC No. 440-01, indicating that a 
licensee is in compliance with Sec. 440.13(a)(8) as long as each policy 
of insurance contains a service of suit clause in which the insurer 
agrees to submit to the jurisdiction of a court of competent 
jurisdiction within the United States and designates an authorized 
agent within the United States for service of legal process on the 
insurer. The FAA understands that given the terms of the Advisory 
Circular licensees are able to comply without difficulty with the terms 
of Sec. 440.13(a)(8). Accordingly, the FAA will accept as compliant 
with Sec. 450.13(a)(8) insurance policies that contain a service of 
suit clause and designation of agent provision and this is expressly 
set forth in the proposed requirement in lieu of an advisory circular.

Section 450.15--Demonstration of Compliance

    Under proposed Sec. 450.15, a reentry licensee would be required to 
demonstrate compliance with part 450 financial responsibility and 
allocation of risk requirements in a manner comparable to that 
currently required of launch licensees under part 440.
    Reentry proposals presented to the FAA as part of pre-application 
consultations include RLVs designed to reenter after a brief stay on 
orbit. Accordingly, evidence of reentry insurance must be submitted to 
and reviewed by the FAA in advance of the licensed launch that will 
place the vehicle in space. For this reason, the FAA proposes to 
require satisfaction of financial responsibility requirements under 
part 450 at the same time financial responsibility for launch is 
demonstrated. Timeframes for submission of proof of insurance and the 
required reciprocal waiver of claims and assumption of responsibility 
agreement under Sec. 450.15 would therefore be the same as for licensed 
launches and would consist of the same elements. These include a 
licensee's certification of compliance with applicable license orders, 
filing of insurance certificates or other evidence of financial 
responsibility, certification that exclusions from coverage are usual 
and that insurance covering the excluded risks is not commercially 
available at reasonable rates, submission of the reciprocal waiver of 
claims agreement in accordance with Sec. 450.17, and an opinion of the 
licensee's insurance broker that insurance obtained on behalf of the 
licensee complies with applicable requirements.

Section 450.17--Reciprocal Waiver of Claims Requirements and Appendix B

    The Commercial Space Act of 1998 extends to reentry licensees and 
participants in reentry activities requirements for entering into 
reciprocal waivers of claims comparable to those imposed on launch 
licensees and participants in launch activities. The scope of required 
waivers for licensed launch activities and the responsibilities assumed 
by each signatory to a reciprocal waiver agreement are explained at 
length in the part 440 Final Rule (63 FR 45592, Aug. 26, 1998) and the 
FAA's detailed rationale need not be repeated in this document.
    In summary, each participant in licensed launch or reentry 
activities is directed to enter into a mutual or reciprocal waiver of 
claims whereby each party agrees to waive claims it may have against 
the other participants for property damage or loss it may sustain and 
agrees to be responsible for property damage or loss it sustains as a 
result of licensed activities. Each participant is therefore 
foreclosed, or estopped, from asserting claims for property damage or 
loss against the other participants, and each is relieved of the threat 
and cost of inter-party litigation. When the government is involved in 
licensed activities, however, its waiver of claims is limited to 
amounts in excess of insurance required to cover claims for damage or 
loss to government property. Each participant in licensed activities 
further agrees to be responsible for personal injury, property damage 
or loss sustained by its own employees as a result of licensed 
activities. The final rules issued by the FAA under part 440 clarify 
that, except for U.S. Government participants including government 
contractors and subcontractors, the obligation of each participant in 
licensed activities to assume responsibility for such losses is a 
contractual obligation to indemnify and hold harmless the other 
participants in the event of losses sustained by one's own employee. 
The reciprocal waiver of claims agreement presented in 14 CFR part 440, 
appendix B, reflects this contractual undertaking. Therefore, claims of 
employees of the various participants in licensed activities, other 
than those of Government personnel as defined in the regulations fall 
outside the scope of liability insurance coverage required under the 
statute and are not eligible for indemnification as third party claims. 
Government personnel are treated differently, as explained in the part 
440 rulemaking, because of limitations on the Government's ability to 
accept an unfunded contingent liability, and therefore claims of 
Government personnel are handled as third party claims to which a 
licensee's liability policy must respond.
    The FAA will require a reciprocal waiver of claims agreement 
resembling that presented in 14 CFR part 440, appendix B, which 
attempts to fashion a single agreement covering all participants in 
related launch and reentry operations. Although the proposed part 
focuses upon licensed reentry activities, the FAA anticipates that most 
licensed reentry activity will involve reentry vehicles that are RLVs 
and has attempted to design a reciprocal waiver of claims agreement 
that accommodates both RLVs and other reentries. Participants in a 
licensed reentry may suffer damage or loss and their employees may 
suffer losses through their involvement in the licensed launch campaign 
required to place a reentry vehicle or payload in Earth orbit or outer 
space and all such participants would be included in the reciprocal 
waiver scheme to accomplish its intended objective of limiting the risk 
of inter-party litigation. Where a licensed reentry is intended to 
occur

[[Page 54463]]

sufficiently independently of the launch that placed the reentry 
vehicle in space, it may be possible to separate launch participants 
from reentry participants, and the FAA would address those situations 
on a case-by-case basis. For the near-term, the agency is proposing to 
utilize a form of agreement that encompasses both launch and reentry 
participants. The form of agreement proposed in part 450 reflects the 
agency's approach by referring to ``licensed activities'' and 
incorporating the broad definitions of ``customer'' and ``contractors 
and subcontractors'' provided in the proposed regulations. Where the 
identity of the customer for a licensed reentry is different from that 
for a launch of an RLV associated with the conduct of a reentry, both 
customers must sign the reciprocal waiver of claims agreement.
    The reciprocal waiver of claims agreement is intended to be broadly 
construed and cover claims regardless of fault, but does not replace 
contractual rights and remedies negotiated by the parties in good faith 
and for consideration, such as reflight guarantees or replacement 
missions. In the part 440 Final Rule, the FAA indicated that only 
claims resulting from willful misconduct are necessarily removed from 
the reciprocal waiver and declined to remove gross negligence from the 
statutory waiver scheme as a matter of regulation. Since issuance of 
the part 440 Final Rule, however, the FAA has learned of reluctance 
among contractors, subcontractors and customers to include a waiver of 
gross negligence leaving participants in licensed launches to negotiate 
coverage for gross negligence-based claims to resolve any remaining 
ambiguity and to avoid litigation. Rather than facilitate the prospect 
of future litigation, the FAA now intends to foreclose that possibility 
by continuing to employ a no-fault, no subrogation waiver of claims 
agreement comparable to that utilized for licensed launches. In doing 
so, the agency affirmatively states that claims for gross negligence 
are intended to be comprehended by the reciprocal waiver of claims 
agreement in order to fulfill its statutory intent and purpose. The 
only exception is willful misconduct by a participant. The FAA believes 
that with the sole exception of willful misconduct, all fault-based 
claims, including gross negligence, must be waived in order to 
satisfactorily fulfill the intent of Congress in legislating a 
comprehensive reciprocal waiver scheme and foreclose erosion of its 
effectiveness through allegations of gross negligence.
    A second concern has also come to the FAA's attention since 
issuance of the part 440 Final Rule. As a matter of convenience and to 
relieve regulatory burdens, the FAA implements statutory reciprocal 
waiver requirements by executing an agreement with the licensee and its 
customer and requiring that each of them pass on, or flow down, to 
their contractors and subcontractors responsibilities that must be 
accepted under the terms of the agreement. The FAA has learned that 
customers and contractors of launch participants have been reluctant to 
comply with flow down requirements of the reciprocal waiver of claims 
agreement. Although the form of agreement utilized by the FAA provides 
relief, through an indemnification provision, to a participant that 
suffers liability as a result of the failure of a signatory to 
implement the agreement properly, the FAA reminds participants that 
such relief measures are not intended to be used as an option in lieu 
of compliance with agreement requirements. Participants in licensed 
launch and reentry activities are directed by 49 U.S.C. 70112(b) to 
enter into such an agreement with the government and with each other. 
The FAA has qualified the requirement by noting that ``(o)nly those 
participants who have their personnel or property involved in licensed 
launch (or reentry) activities, and who may make claims against other 
participants as a result of loss or damage sustained by their personnel 
or (to their) property in the event of an accident, should be expected 
to enter into reciprocal waivers of claims.'' 61 FR at 39012. For such 
entities, participation is not intended to be elective. Failure to 
comply may subject a participant in licensed launch or reentry 
activities to enforcement proceedings by the FAA.

Section 450.19--United States Payment of Excess Third-Party Liability 
Claims

    Proposed Sec. 450.19 would set forth in a regulation the commitment 
of the U.S. Government and the procedures by which it accepts 
responsibility for satisfying successful third party claims against 
reentry and associated launch participants to the extent claims are 
covered claims and exceed required insurance up to $1.5 billion (as 
adjusted for post-January 1, 1989 inflation) above that amount, absent 
willful misconduct by the party on whose behalf payment of the third-
party claim is sought.
    Following expiration of the policy period required under the 
regulations, or if coverage is not available because of a ``usual'' 
exclusion, the Government undertakes responsibility for third-party 
claims from the first dollar of loss, as long as the claim is eligible 
for indemnification. According to House Science Committee report 
language, a clear causal nexus must exist between the licensed activity 
and the claim to give rise to the government's obligations. Absent this 
causal nexus, the legally liable party would be fully responsible for 
satisfying claims and, in the event of Government liability under a 
treaty obligation, the Government could pursue contribution from the 
responsible party. As previously noted, the interested public may refer 
to the part 440 Final Rule (63 FR 45592, Aug. 26, 1998) for a 
discussion of the FAA's approach to ``usual'' exclusions.

Paperwork Reduction Act

    This proposal contains information collection requirements. As 
required by the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)), 
the Department of Transportation has submitted the information 
collection requirements associated with this proposal to the Office of 
Management and Budget for its review.
    Title: Financial Requirements for Licensed Reentry Activities.
    The FAA is proposing to establish financial responsibility 
requirements covering risks associated with the licensed reentry of a 
reentry vehicle. The FAA would determine, on an individual basis, the 
amount of required insurance or other form of financial responsibility 
after examining the risks associated with a particular reentry vehicle, 
its operational capabilities and designated reentry site. This proposal 
provides general rules for demonstrating compliance with insurance 
requirements and implementing statutory-based Government/industry risk 
sharing provisions in a manner comparable to that currently utilized 
for commercial launches.
    The required information will aid the FAA in establishing financial 
responsibility requirements covering risks associated with the licensed 
reentry of a reentry vehicle. The information to be collected supports 
FAA determining the amount of required liability insurance for a 
reentry operator after examining the risks associated with an reentry 
vehicle, its operational capabilities, and its designated reentry site. 
Data collected for the reentry case closely parallel information 
associated with financial responsibilities for licensed launch 
activities. The frequency of required submissions, therefore, will 
depend upon the number of prospective reentry vehicle operators 
authorized to conduct licensed reentry operations.

[[Page 54464]]

    The Respondents are all licensees authorized to conduct licensed 
reentry activities. ESTIMATED AVERAGE ANNUAL BURDEN 1566.
    The agency is soliciting comments to: (1) Evaluate whether the 
proposed collection of information is necessary for the proper 
performance of the functions of the agency, including whether the 
information will have practical utility; (2) evaluate the accuracy of 
the agency's estimate of the burden; (3) enhance the quality, utility, 
and clarity of the information to be collected; and (4) minimize the 
burden of the collection of information on those who are to respond, 
including through the use of appropriate automated, electronic, 
mechanical, or other technological collection techniques or other forms 
of information technology (for example, permitting electronic 
submission of responses).
    Individuals and organizations may submit comments on the 
information collection requirements by December 6, 1999, and should 
direct them to the address listed in the ADDRESSES section of this 
document.
    According to the regulations implementing the Paperwork Reduction 
Act of 1995 (5 CFR 1320.8(b)(2)(vi)), an agency may not conduct or 
sponsor, and a person is not required to respond to a collection of 
information unless it displays a currently valid OMB control number. 
The OMB control number for this information collection will be 
published in the Federal Register after it is approved by the Office of 
Management and Budget.

Regulatory Evaluation Summary

    Proposed and final rule changes to Federal regulations must undergo 
several economic analyses. First, Executive Order 12866 directs that 
each Federal agency shall propose or adopt a regulation only upon a 
reasoned determination that the benefits of the intended regulation 
justify its costs. Second, the Regulatory Flexibility Act of 1980, as 
amended in May 1996, requires agencies to analyze the economic effect 
of regulatory changes on small entities. Third, the Office of 
Management and Budget directs agencies to assess the effect of 
regulatory changes on international trade.
    In conducting these analyses, the FAA has determined that the 
proposed rule would generate benefits that justify its costs and is ``a 
non-significant regulatory action'' as defined in the Executive Order 
and the Department of Transportation Regulatory Policies and 
Procedures. The proposed rule is not a significant action because of 
public interest nor on the basis of economic impacts. The proposed rule 
is not expected to have a significant impact on a substantial number of 
small entities and would not constitute a barrier to international 
trade. In addition, this proposed rule does not contain Federal 
intergovernmental or private sector mandates. Therefore, the 
requirements of Title II of the Unfunded Mandates Reform Act of 1995 do 
not apply. These analyses, available in the docket, are summarized 
below.

Baseline for Analysis

    For the purpose of this evaluation, the baseline is defined as 
industry practice that existed prior to the Commercial Space Act of 
October 1998 (CSA). The CSA authorizes the Secretary of the U.S. 
Department of Transportation to require reentry licensees to meet 
financial responsibility requirements, generally satisfied by acquiring 
liability insurance to cover those risks imposed by their intended 
reentry activities. Such requirements would be implemented in the form 
of this proposed rule. The baseline should represent routine industry 
practice in the absence of any proposed rulemaking requirements by FAA 
and prior to statutory authority received from Congress.

Costs

    Reentry commercial space operators are likely to also be launch 
activity operators, given that RLVs will, for the foreseeable future, 
constitute the bulk of reentry vehicle activity. Since reentry 
operators would repeat much of the compliance process for the recently 
released final rule for launch financial responsibility, cost-saving 
knowledge will be gained that would be helpful in meeting similar 
proposed requirements for reentry financial responsibility. Even though 
reentry activities take place at different times than launch 
activities, still the personnel involved in both activities are 
expected to have acquired a high level of proficiency and cost-saving 
practices. The potential cost of the proposed reentry financial 
responsibility requirements are expected to be lower than they 
otherwise would be, as the result of knowledge gained from launch 
activities by such operators.
    The proposed rule should result in a stronger, more stable, 
commercial space transportation industry by formalizing the statute 
from the CSA into regulation. Limiting risk based on maximum probable 
loss (MPL) should result in greater certainty of the potential 
liability costs (and resulting lower business risk) to commercial space 
transportation firms. The Federal Aviation Administration defines MPL 
as the tool that establishes the dollar value of the maximum magnitude 
of loss among probable accidental events causing casualties or property 
damage; the accidental event in question must be sufficiently probable 
to warrant financial responsibility protection.
    The proposed rule would potentially impose costs on U.S. commercial 
space reentry operators and the U.S. government as the result of these 
two requirements.

     Insurance Requirements for Licensed Reentry Activities. 
In accordance with the Statute, the proposed rule would require U.S. 
licensed reentry commercial space operators to acquire insurance to 
cover possible damage or loss of Government property. The licensee 
would also be required to obtain insurance to cover possible 
liability to participants in reentry activities in the event of 
death, injury, damage or loss to third parties (including Government 
personnel). These requirements also include the duration of 
insurance.
     Provisions Requiring Private Party Participants in 
Licensed Activities To Waive Claims Against One Another. The 
proposed rule would require that potentially impacted operators 
enter into cross-waiver agreements with each other. Specifically, 
the private parties in licensed activities sign waivers by which the 
parties agree to forfeit the right to sue each other for damages or 
injuries associated with the activities. The licensee not only 
assumes responsibility for its own losses, but now also assumes 
responsibility for claims of its contractors and subcontractors 
against other private party participants in the event the cross-
waiver requirement has not been properly applied to those parties.

    The proposed 30-day duration of insurance coverage following a 
planned reentry may impose additional costs on reentry operators. Such 
costs are not expected to be significant since potential 30-day costs 
for reentry would be nearly the same as an existing requirement for 
launch activity, and reentry insurance coverage falls within the 
typical period of coverage routinely used by the commercial space 
industry. The shifting of expected costs above MPL of damage and loss 
claims or of injury claims from the licensees to the Government would 
also aid the commercial space transportation industry. The shifting of 
these costs onto the Government would relieve the licensees of the need 
to insure for these claims and would also demonstrate U.S. government 
support for the commercial space transportation industry. The cross-
waiver provisions of the proposed rule should lower any costs of 
litigation among private party participants in licensed activities. The 
proposed requirement for cross-waivers limits the risk of liability to 
others in licensed

[[Page 54465]]

activities and results in a more certain business environment (or lower 
business risk) for all involved parties.
    The FAA estimates that the proposed rule would result in the 
reallocation of expected liability insurance costs from licensees to 
the Federal government of about $4,200 ($3,700, discounted) over a 
five-year period. This estimate is based in part upon work by Princeton 
Synergetics Inc. (PSI), under contract with the FAA, which analyzed the 
consequences of the U.S. government's assumption of risk exposure of up 
to $1.5 billion (subject to adjustment for inflation after January 1, 
1989) for third-party claims. The additional administrative (or 
paperwork cost) to the Federal government associated with FAA's 
responsibilities under the proposed rule is estimated at $7,600 
($5,800, discounted) over five years. Thus, the total cost to the FAA 
would be about $11,800 ($4,200+$7,600) over the next 5 years, as the 
result of the proposed rule. This cost estimate represents the amount 
that would be incurred by the FAA for financial responsibility aspects 
of the licensing process (which take into account those proposed 
provisions to protect private party participants against claims by 
third parties and provisions of cross-waivers).

Benefits

    The primary benefit of the proposed rule is that it would support 
and promote U.S. commercial space reentry activity within the United 
States and by U.S. firms. It is clearly in the interest of the United 
States to remain in a worldwide position of leadership in commercial 
space flight. Specifically, the proposed rule would ensure that the 
United States reentry operators are not subject to a competitive trade 
disadvantage by their rivals abroad as a result of their inability to 
acquire adequate liability insurance to cover risks associated with 
their intended reentry activities.
    This proposed rule would also generate other potential qualitative 
benefits in two forms. First, in terms of third parties, this proposed 
rule would provide added assurance that any damages to property or 
casualty losses (e.g., fatalities or serious injuries) resulting from 
reentry activities would be adequately covered either by commercial 
liability insurance purchased by reentry operators or by the U.S. 
government. This potential benefit would be generated by the proposed 
requirement that all reentry operators have liability insurance 
coverage up to the MPL amount for risks resulting from their intended 
reentry activities and statutory risk sharing provisions whereby the 
U.S. government provides indemnification up to $1.5 billion (subject to 
adjustment for inflation after January 1, 1989) above the required 
insurance by this proposal. And last, the proposed cross-waiver 
requirement would also generate potential cost-savings by likely 
mitigating or eliminating litigation costs between reentry 
participants.

Initial Regulatory Flexibility Determination

    The Regulatory Flexibility Act of 1980 establishes ``as a principle 
of regulatory issuance that agencies shall endeavor, consistent with 
the objective of the proposed rule and of applicable statutes, to fit 
regulatory and informational requirements to the scale of the business, 
organizations, and governmental jurisdictions subject to regulation.'' 
To achieve that principle, the Act requires agencies to solicit and 
consider flexible regulatory proposals and to explain the rationale for 
their actions. The Act covers a wide range of small entities, including 
small businesses, not-for-profit organizations and small governmental 
jurisdictions.
    Agencies must perform a review to determine whether a proposed or 
final rule will have a significant economic impact on a substantial 
number of small entities. If the determination is that it will, the 
agency must prepare a regulatory flexibility analysis (RFA) as 
described in the Act.
    However, if an agency determines that a proposed or final rule is 
not expected to have a significant economic impact on a substantial 
number of small entities, section 605(b) of the 1980 Act provides that 
the head of the agency may so certify and an RFA is not required. The 
certification must include a statement providing the factual basis for 
this determination, and the reasoning should be clear.
    The Small Business Administration has defined small business 
entities relating to space vehicles (Standard Industrial Codes 3761, 
3764, and 3769) as entities comprising fewer than 1,000 employees. The 
FAA has been unable to determine the extent to which the proposed rule 
would impact the five commercial space reentry entities currently 
developing reentry technology, due to the lack of information for the 
required cost of insurance, as explained previously in the cost section 
of this evaluation. The proposed rule could impose additional costs on 
potential small reentry operators in the form of higher insurance 
requirements (which often result in higher premiums), as the result of 
the proposed requirement to cover MPL for both third party liability 
and Government property. On the other hand, the proposed requirement 
could be partially offset or entirely offset by the potential cost-
savings from the federal Government's statutory risk sharing 
indemnification feature of the proposed rule. This feature would shift 
the cost of insurance coverage from the licensee for any liability 
beyond MPL after 30 days, up to $1.5 billion (subject to adjustment for 
inflation after January 1, 1989). This cost-savings is estimated to be 
at least $4,200 for all of the potentially affected operators over the 
5-year period (2000-2004). Still, with some degree of uncertainty, this 
information would suggest that the potential cost of compliance for 
reentry small operators might not be significant.
    Despite the absence of quantitative cost information for potential 
reentry licensees and pursuant to the Regulatory Flexibility Act (5 
U.S.C. 605(b)), the FAA certifies with reasonable certainty that the 
proposed rule would not impose a significant economic impact on a 
substantial number of small entities. While there maybe significant 
costs incurred by some operators, such costs are not expected to impact 
a substantial number of them. Since there is no cost of compliance 
information available to derive a quantitative cost estimate, there is 
still uncertanity about compliance costs. Because of this uncertainty, 
the FAA solicits comments from the commercial space reentry operators 
as to the net cost of compliance with the proposed rule. The FAA also 
solicits comments from affected entities with respect to this finding 
and determination. All comments must be clear and well documented.

International Trade Impact Assessment

    The proposed rule contains revisions to commercial space 
transportation licensing regulations that would not constitute a 
barrier to international trade, including the export of domestic goods 
and services out of the United States. As noted in the benefits section 
of this evaluation, the proposed rule would implement statutory 
provisions such as measures aimed at strengthening the competitive 
position of U.S. reentry operators by allowing the U.S. government to 
share risks of additional liability insurance for reentry activity. 
This practice is done in other countries around the world for launch 
operators who compete with U.S. launch operators. The proposed rule 
would ensure that U.S. reentry operators would remain competitive with 
their counterparts abroad. For this reason, the

[[Page 54466]]

proposed rule is not expected to place domestic commercial space 
reentry operators at a competitive trade disadvantage with respect to 
foreign interests competing for similar business in international 
markets. It would also not hinder the ability of foreign commercial 
space rivals to compete in the United States. Therefore, the proposed 
rule is neither expected to affect trade opportunities of U.S. 
commercial space reentry doing business abroad nor would it adversely 
impact the trade opportunities of foreign firms doing business in the 
United States. The FAA invites comments on the validity of this 
assertion and any potential impacts related thereto.

Federalism Implications

    The regulations proposed herein will not have a substantial direct 
effects on the states, on the relationship between the national 
government and the states, or on the distribution of power and 
responsibilities among the various levels of government. Therefore, in 
accordance with Executive Order 12612, it is determined that this 
proposal would not have sufficient federalism implications to warrant 
the preparation of a Federalism Assessment.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995, enacted as 
Public Law 104-4 on March 22, 1995, requires each Federal agency, to 
the extent permitted by law, to prepare a written assessment of the 
effects of any Federal mandate upon State, local, and tribal 
governments, in the aggregate, or by the private sector, of $100 
million or more (adjusted annually for inflation) in any one year. In 
1998 dollars, this estimate of $100 million translates into $105 
million using the GDP implicit price deflators for 1995 and 1998. 
Section 204(a) of the Act, Title 2 of the United States Code 1534(a), 
requires the Federal agency to develop an effectiveness process to 
permit timely input by elected officers (or their designees) of State, 
local, and tribal governments on a proposed ``significant 
intergovernmental mandate.'' A significant intergovernmental mandate 
under the Act is any provision in a Federal agency regulation that 
would impose an enforceable duty upon State, local, and tribal 
governments, in the aggregate, of $100 million (adjusted annually for 
inflation) in any one year. Section 203 of the Act, Title 2 of the 
United States Code 1533, which supplements section 204(a), provides 
that before establishing any regulatory requirements that might 
significantly or uniquely affect small governments, the agency shall 
have developed a plan that, among other things, provides for notice to 
potentially affected small governments, if any, and for a meaningful 
and timely opportunity for any affected small governments to provide 
input in the development of proposed rules.
    Based on the evaluation and impacts reported herein, the proposed 
rule is not expected to meet the $105 million per year cost threshold. 
Consequently, it would not impose a significant cost on or uniquely 
affect small governments. Therefore, the requirements of Title II of 
the Unfunded Mandates Reform Act of 1995 do not apply to the proposed 
regulation.

Environmental Assessment

    FAA Order 1050.1D defines FAA actions that may be categorically 
excluded from preparation of a National Environmental Policy Act (NEPA) 
environmental assessment (EA) or environmental impact statement (EIS). 
In accordance with FAA Order 1050.1D, appendix 4, paragraph 4(i), 
regulatory documents which cover administrative or procedural 
requirements qualify for a categorical exclusion.

Energy Impact

    The energy impact of the rulemaking action has been assessed in 
accordance with the Energy Policy and Conservation Act (EPCA) and 
Public Law 94-163, as amended (42 U.S.C. 6362). It has been determined 
that it is not a major regulatory action under the provisions of the 
EPCA.

List of Subjects in 14 CFR Part 450

    Armed forces; Claims; Federal building and facilities; Government 
property; Indemnity payments; Insurance; Reporting and recordkeeping 
requirements; Rockets; Space transportation and exploration.

Proposed Amendments

    In consideration of the foregoing, the Federal Aviation 
Administration proposes to amend Chapter III of title 14 of the Code of 
Federal Regulations in one of the following two ways:
    1. Subchapter C of Chapter III, Title 14, Code of Federal 
Regulations, would be amended by revising Part 440 to include the 
Financial Responsibility Requirements for Licensed Reentry Activities: 
or
    2. Subchapter C of Chapter III, Title 14, Code of Federal 
Regulations, would be amended by adding a new Part 450 to read as 
follows:

PART 450--FINANCIAL RESPONSIBILITY

Subpart A--Financial Responsibility for Licensed Reentry Activities

Sec.
450.1  Scope of part; basis.
450.3  Definitions.
450.5  General.
450.7  Determination of maximum probable loss.
450.9  Insurance requirements for licensed reentry activities.
450.11  Duration of coverage; modifications.
450.13  Standard conditions of insurance coverage.
450.15  Demonstration of compliance.
450.17  Reciprocal waiver of claims requirements.
450.19  United States payment of excess third-party liability 
claims.
Appendix A to Part 450--Information Requirements for Obtaining a 
Maximum Probable Loss Determination for Licensed Reentry Activities.
Appendix B to Part 450--Agreement for Waiver of Claims and 
Assumption of Responsibility.

    Authority: 49 U.S.C. 70101-70121; 49 CFR 1.47.

Subpart A Financial Responsibility for Licensed Reentry Activities


Sec. 450.1  Scope of part; basis.

    This part sets forth financial responsibility and allocation of 
risk requirements applicable to commercial space reentry activities 
that are authorized to be conducted under a license issued pursuant to 
this subchapter.


Sec. 450.3  Definitions.

    (a) For purposes of this part--
    Bodily injury means physical injury, sickness, disease, disability, 
shock, mental anguish, or mental injury sustained by any person, 
including death.
    Contractors and subcontractors means those entities that are 
involved at any tier, directly or indirectly, in licensed reentry 
activities, and includes suppliers of property and services, and the 
component manufacturers of a reentry vehicle or payload. Contractors 
and subcontractors include those entities as defined in 
Sec. 440.3(a)(2) of this chapter involved in licensed launch activities 
associated with a particular reentry.
    Customer means:
    (1) A person who procures reentry services from a licensee or 
launch services associated with a particular reentry;
    (2) Any person to whom the customer has sold, leased, assigned, or 
otherwise transferred its rights in the payload (or any part thereof), 
to be reentered by the

[[Page 54467]]

licensee, including a conditional sale, lease, assignment, or transfer 
of rights.
    (3) Any person who has placed property on board the payload for 
reentry or payload services; and any person to whom the customer has 
transferred its rights to such services.
    Federal range facility means a Government-owned installation at 
which launches or reentries take place.
    Financial responsibility means statutorily required financial 
ability to satisfy liability as required under 49 U.S.C. 70101-70121.
    Government personnel means employees of the United States, its 
agencies, and its contractors and subcontractors, involved in reentry 
services for licensed reentry activities or launch services for 
licensed launch activities associated with a particular reentry. 
Employees of the United States include members of the Armed Forces of 
the United States.
    Hazardous operations means activities, processes, and procedures 
that, because of the nature of the equipment, facilities, personnel, or 
environment involved or function being performed, may result in bodily 
injury or property damage.
    Liability means a legal obligation to pay claims for bodily injury 
or property damage resulting from licensed reentry activities.
    License means an authorization to conduct licensed reentry 
activities, issued by the Office under this subchapter.
    Licensed reentry activities means the reentry of a reentry vehicle, 
including a reusable launch vehicle (RLV), as defined in a regulation 
or license issued by the Office and carried out pursuant to a license.
    Maximum probable loss (MPL) means the greatest dollar amount of 
loss for bodily injury or property damage that is reasonably expected 
to result from licensed reentry activities;
    (1) Losses to third parties, excluding Government personnel and 
other launch or reentry participants' employees involved in licensed 
reentry activities, that are reasonably expected to result from 
licensed reentry activities are those having a probability of 
occurrence on the order of no less than one in ten million.
    (2) Losses to Government property and Government personnel, as 
defined in this section, that are reasonably expected to result from 
licensed reentry activities are those having a probability of 
occurrence on the order of no less than one in one hundred thousand.
    Office means the Associate Administrator for Commercial Space 
Transportation of the Federal Aviation Administration, U. S. Department 
of Transportation.
    Property damage means partial or total destruction, impairment, or 
loss of tangible property, real or personal.
    Regulations means the Commercial Space Transportation Licensing 
Regulations, codified at 14 CFR Ch. III.
    Third party means:
    (1) Any person other than:
    (i) The United States, its agencies, and its contractors and 
subcontractors involved in reentry services for licensed reentry 
activities or launch services for licensed launch activities associated 
with a particular reentry;
    (ii) The licensee and its contractors and subcontractors involved 
in reentry services for licensed reentry activities or launch services 
for licensed launch activities associated with a particular reentry; 
and
    (iii) The customer and its contractors and subcontractors involved 
in reentry services for licensed reentry activities or launch services 
for licensed launch activities associated with a particular reentry.
    (2) Government personnel, as defined in this section, are third 
parties.
    United States means the United States Government, including its 
agencies.
    (b) Except as otherwise provided in this section, any term used in 
this part and defined in 49 U.S.C. 70101-70121 or in Sec. 401.5 of this 
chapter shall have the meaning contained therein.


Sec. 450.5  General.

    (a) No person shall commence or conduct reentry activities that 
require a license unless that person has obtained a license and fully 
demonstrated compliance with the financial responsibility and 
allocation of risk requirements set forth in this part.
    (b) The Office shall prescribe the amount of financial 
responsibility a licensee is required to obtain and any additions to or 
modifications of the amount in a license order issued concurrent with 
or subsequent to the issuance of a license.
    (c) Demonstration of financial responsibility under this part shall 
not relieve the licensee of ultimate responsibility for liability, 
loss, or damage sustained by the United States resulting from licensed 
reentry activities, except to the extent that:
    (1) Liability, loss, or damage sustained by the United States 
results from willful misconduct of the United States or its agents;
    (2) Covered claims of third parties for bodily injury or property 
damage arising out of any particular reentry exceed the amount of 
financial responsibility required under Sec. 450.9(c) of this part and 
do not exceed $1,500,000,000 (as adjusted for inflation occurring after 
January 1, 1989) above such amount, and are payable pursuant to 49 
U.S.C. 70113 and Sec. 450.19 of this part. Claims of employees of 
entities listed in Sec. 450.3(a) in the definition of third party, in 
paragraphs (1)(ii) and (1)(iii) of this part for bodily injury or 
property damage are not covered claims;
    (3) Covered claims for property loss or damage exceed the amount of 
financial responsibility required under Sec. 450.9(e) of this part and 
do not result from willful misconduct of the licensee; or
    (4) The licensee has no liability for covered claims by third 
parties for bodily injury or property damage arising out of any 
particular reentry that exceed $1,500,000,000 (as adjusted for 
inflation occurring after January 1, 1989) above the amount of 
financial responsibility required under Sec. 450.9(c) of this part.
    (d) A licensee's failure to comply with the requirements in this 
part may result in suspension or revocation of a license, and subjects 
the licensee to civil penalties as provided in part 405 of this 
chapter.


Sec. 450.7  Determination of maximum probable loss.

    (a) The Office shall determine the maximum probable loss (MPL) from 
covered claims by a third party for bodily injury or property damage, 
and the United States, its agencies, and its contractors and 
subcontractors for covered property damage or loss, resulting from 
licensed reentry activities. The maximum probable loss determination 
forms the basis for financial responsibility requirements issued in a 
license order.
    (b) The Office issues its determination of maximum probable loss no 
later than ninety days after a licensee or transferee has requested a 
determination and submitted all information required by the Office to 
make the determination. The Office shall consult with Federal agencies 
that are involved in, or whose personnel or property are exposed to 
risk of damage or loss as a result of, licensed reentry activities 
before issuing a license order prescribing financial responsibility 
requirements and shall notify the licensee or transferee if interagency 
consultation may delay issuance of the MPL determination.
    (c) Information requirements for obtaining a maximum probable loss 
determination are set forth in Appendix A to this part. Any person 
requesting a determination of maximum probable loss must submit 
information in accordance with Appendix A requirements, unless the 
Office has waived requirements. In lieu of

[[Page 54468]]

submitting required information, a person requesting a maximum probable 
loss determination may designate and certify certain information 
previously submitted for a prior determination as complete, valid, and 
equally applicable to its current request. The requester is responsible 
for the continuing accuracy and completeness of information submitted 
under this part and shall promptly report any changes in writing.
    (d) The Office shall amend a determination of maximum probable loss 
required under this section at any time prior to completion of licensed 
reentry activities as warranted by supplementary information provided 
to or obtained by the Office after the MPL determination is issued. Any 
change in financial responsibility requirements as a result of an 
amended MPL determination shall be set forth in a license order.
    (e) The Office may make a determination of maximum probable loss at 
any time other than as set forth in paragraph (b) of this section, upon 
request by any person.


Sec. 450.9  Insurance requirements for licensed reentry activities.

    (a) As a condition of each reentry license, the licensee must 
comply with insurance requirements set forth in this section and in a 
license order issued by the Office, or otherwise demonstrate the 
required amount of financial responsibility.
    (b) The licensee must obtain and maintain in effect a policy or 
policies of liability insurance, in an amount determined by the Office 
under paragraph (c) of this section, that protects the following 
persons as additional insureds to the extent of their respective 
potential liabilities against covered claims by a third party for 
bodily injury or property damage resulting from licensed reentry 
activities:
    (1) The licensee, its customer, and their respective contractors 
and subcontractors, and the employees of each, involved in licensed 
reentry activities and in licensed launch activities associated with a 
particular reentry;
    (2) The United States, its agencies, and its contractors and 
subcontractors involved in licensed reentry activities and in licensed 
launch activities associated with a particular reentry; and
    (3) Government personnel.
    (c) The Office shall prescribe for each licensee the amount of 
insurance required to compensate the total of covered third-party 
claims for bodily injury or property damage resulting from licensed 
reentry activities. Covered third-party claims include claims by the 
United States, its agencies, and its contractors and subcontractors for 
damage or loss to property other than property for which insurance is 
required under paragraph (d) of this section. The amount of insurance 
required is based upon the Office's determination of maximum probable 
loss; however, it will not exceed the lesser of:
    (1) $500 million; or
    (2) The maximum liability insurance available on the world market 
at a reasonable cost, as determined by the Office.
    (d) The licensee must obtain and maintain in effect a policy or 
policies of insurance, in an amount determined by the Office under 
paragraph (e) of this section, that covers claims by the United States, 
its agencies, and its contractors and subcontractors involved in 
licensed reentry activities resulting from licensed reentry activities. 
Property covered by this insurance must include all property owned, 
leased, or occupied by, or within the care, custody, or control of, the 
United States and its agencies, and its contractors and subcontractors 
involved in licensed reentry activities, at a Federal range facility. 
Insurance must protect the United States and its agencies, and its 
contractors and subcontractors involved in licensed reentry activities.
    (e) The Office shall prescribe for each licensee the amount of 
insurance required to compensate claims for property damage under 
paragraph (d) of this section resulting from licensed reentry 
activities in connection with any particular reentry. The amount of 
insurance is based upon a determination of maximum probable loss; 
however, it will not exceed the lesser of:
    (1) $100 million; or
    (2) The maximum available on the world market at a reasonable cost, 
as determined by the Office.
    (f) In lieu of a policy of insurance, a licensee may demonstrate 
financial responsibility in another manner meeting the terms and 
conditions applicable to insurance as set forth in this part. The 
licensee must describe in detail the method proposed for demonstrating 
financial responsibility and how it assures that the licensee is able 
to cover claims as required under this part.


Sec. 450.11  Duration of coverage; modifications.

    (a) Insurance coverage required under Sec. 450.9, or other form of 
financial responsibility, shall attach upon commencement of licensed 
reentry activities, and remain in full force and effect as follows:
    (1) For ground operations, until completion of licensed reentry 
activities at the reentry site; and
    (2) For reentry activities, thirty days from initiation of reentry 
flight; however, in the event of an abort that results in the reentry 
vehicle remaining on orbit, insurance shall remain in place until the 
Office's determination that risk to third parties and Government 
property as a result of licensed reentry activities is sufficiently 
small that financial responsibility is no longer necessary, as 
determined by the Office through the risk analysis conducted to 
determine MPL and specified in a license order.
    (b) Financial responsibility required under this part may not be 
replaced, canceled, changed, withdrawn, or in any way modified to 
reduce the limits of liability or the extent of coverage, nor expire by 
its own terms, prior to the time specified in a license order, unless 
the Office is notified at least 30 days in advance and expressly 
approves the modification.


Sec. 450.13  Standard conditions of insurance coverage.

    (a) Insurance obtained under Sec. 450.9 shall comply with the 
following terms and conditions of coverage:
    (1) Bankruptcy or insolvency of an insured, including any 
additional insured, shall not relieve the insurer of any of its 
obligations under any policy.
    (2) Policy limits shall apply separately to each occurrence and, 
for each occurrence to the total of claims arising out of licensed 
reentry activities in connection with any particular reentry.
    (3) Except as provided in this paragraph, each policy must pay 
claims from the first dollar of loss, without regard to any deductible, 
to the limits of the policy. A licensee may obtain a policy containing 
a deductible amount if the amount of the deductible is placed in an 
escrow account or otherwise demonstrated to be unobligated, 
unencumbered funds of the licensee, available to compensate claims at 
any time claims may arise.
    (4) Each policy shall not be invalidated by any action or inaction 
of the licensee or any additional insured, including nonpayment by the 
licensee of the policy premium, and must insure the licensee and each 
additional insured regardless of any breach or violation of any 
warranties, declarations, or conditions contained in the policies by 
the licensee or any additional insured (other than a breach or 
violation by the licensee or an additional insured, and then only as 
against that licensee or additional insured).

[[Page 54469]]

    (5) Exclusions from coverage must be specified.
    (6) Insurance shall be primary without right of contribution from 
any other insurance that is carried by the licensee or any additional 
insured.
    (7) Each policy must expressly provide that all of its provisions, 
except the policy limits, operate in the same manner as if there were a 
separate policy with and covering the licensee and each additional 
insured.
    (8) Each policy must be placed with an insurer of recognized 
reputation and responsibility that is licensed to do business in any 
State, territory, possession of the United States, or the District of 
Columbia. A licensee complies with this section if each of its policies 
of insurance obtained under this part contains a contract clause in 
which the insurer agrees to submit to the jurisdiction of a court of 
competent jurisdiction within the United States and designates an 
authorized agent within the United States for service of legal process 
on the insurer.
    (9) Except as to claims resulting from the willful misconduct of 
the United States or its agents, the insurer shall waive any and all 
rights of subrogation against each of the parties protected by required 
insurance.
    (b) [Reserved.]


Sec. 450.15  Demonstration of compliance.

    (a) A licensee must submit evidence of financial responsibility and 
compliance with allocation of risk requirements under this part, as 
follows, unless a license order specifies otherwise due to the 
proximity of the licensee's intended date for commencement of licensed 
activities:
    (1) The waiver of claims agreement required under Sec. 450.17(c) of 
this part must be submitted at least 30 days before commencement of 
licensed launch activities involving the reentry licensee;
    (2) Evidence of insurance must be submitted at least 30 days before 
commencement of licensed launch activities involving the reentry 
licensee;
    (3) Evidence of financial responsibility in a form other than 
insurance, as provided under Sec. 450.9(f) of this part, must be 
submitted at least 60 days before commencement of licensed launch 
activities involving the reentry licensee; and
    (4) Evidence of renewal of insurance or other form of financial 
responsibility must be submitted at least 30 days in advance of its 
expiration date.
    (b) Upon a complete demonstration of compliance with financial 
responsibility and allocation of risk requirements under this part, the 
requirements shall preempt any provisions in agreements between the 
licensee and an agency of the United States governing access to or use 
of United States reentry property or reentry services for licensed 
reentry activities which address financial responsibility, allocation 
of risk and related matters covered by 49 U.S.C. 70112, 70113.
    (c) A licensee must demonstrate compliance as follows:
    (1) The licensee must provide proof of insurance required under 
Sec. 450.9 by:
    (i) Certifying to the Office that it has obtained insurance in 
compliance with the requirements of this part and any applicable 
license order;
    (ii) Filing with the Office one or more certificates of insurance 
evidencing insurance coverage by one or more insurers under a currently 
effective and properly endorsed policy or policies of insurance, 
applicable to licensed reentry activities, on terms and conditions and 
in amounts prescribed under this part, and specifying policy 
exclusions;
    (iii) In the event of any policy exclusions or limitations of 
coverage that may be considered usual under Sec. 450.19(c) of this 
part, or for purposes of implementing the Government's waiver of claims 
for property damage under 49 U.S.C. 70112(b)(2), certifying that 
insurance covering the excluded risks is not commercially available at 
reasonable cost; and
    (iv) Submitting to the Office, for signature by the Department on 
behalf of the United States Government, the waiver of claims and 
assumption of responsibility agreement required by Sec. 450.17(c) of 
this part, executed by the licensee and its customer.
    (2) Certifications required under this section must be signed by a 
duly authorized officer of the licensee.
    (d) Certificate(s) of insurance required under paragraph (c)(1)(ii) 
of this section must be signed by the insurer issuing the policy and 
accompanied by an opinion of the insurance broker that the insurance 
obtained by the licensee complies with the specific requirements for 
insurance set forth in this part and any applicable license order.
    (e) The licensee must maintain, and make available for inspection 
by the Office upon request, all required policies of insurance and 
other documents necessary to demonstrate compliance with this part.
    (f) In the event the licensee demonstrates financial responsibility 
using means other than insurance, as provided under Sec. 450.9(f) of 
this part, the licensee must provide proof that it has met the 
requirements set forth in this part and in a license order issued by 
the Office.


Sec. 450.17  Reciprocal waiver of claims requirements.

    (a) As a condition of each reentry license, the licensee shall 
comply with reciprocal waiver of claims requirements as set forth in 
this section.
    (b) The licensee shall implement reciprocal waivers of claims with 
its contractors and subcontractors, its customer(s) and the customer's 
contractors and subcontractors, and the launch licensee and its 
contractors and subcontractors and customers, under which each party 
waives and releases claims against the other parties to the waivers and 
agrees to assume financial responsibility for property damage it 
sustains and for bodily injury or property damage sustained by its own 
employees, and to hold harmless and indemnify each other from bodily 
injury or property damage sustained by its employees, resulting from 
reentry activities, including licensed launch activities associated 
with a particular reentry, regardless of fault.
    (c) For each licensed reentry in which the U.S. Government, its 
agencies, or its contractors and subcontractors is involved in licensed 
reentry activities or licensed launch activities associated with a 
particular reentry, or where property insurance is required under 
Sec. 440.9(d) of this subchapter, or Sec. 450.9(d), the Federal 
Aviation Administration of the Department of Transportation, the 
licensee, and its customer shall enter into a reciprocal waiver of 
claims agreement in the form set forth in appendix B to this part or 
that satisfies its requirements.
    (d) The reentry licensee and its customer, the launch licensee and 
its customer, and the Federal Aviation Administration of the Department 
of Transportation on behalf of the United States and its agencies but 
only to the extent provided in legislation, must agree in any waiver of 
claims agreement required under this part to indemnify another party to 
the agreement from claims by the indemnifying party's contractors and 
subcontractors arising out of the indemnifying party's failure to 
implement properly the waiver requirement.


Sec. 450.19  United States payment of excess third-party liability 
claims.

    (a) The United States pays successful covered claims (including 
reasonable expenses of litigation or settlement) of a third party 
against the licensee, the customer, and the contractors and 
subcontractors of the licensee and the customer, and the employees of 
each involved in licensed reentry activities, the licensee, customer 
and the contractors and subcontractors of each

[[Page 54470]]

involved in licensed launch activities associated with a particular 
reentry, and the contractors and subcontractors of the United States 
and its agencies, and their employees, involved in licensed reentry 
activities and licensed launch activities associated with a particular 
reentry, to the extent provided in an appropriation law or other 
legislative authority providing for payment of claims in accordance 
with 49 U.S.C. 70113, and to the extent the total amount of such 
covered claims arising out of any particular reentry:
    (1) Exceeds the amount of insurance required under Sec. 450.9(b); 
and
    (2) Is not more than $1,500,000,000 (as adjusted for inflation 
occurring after January 1, 1989) above that amount.
    (b) Payment by the United States under paragraph (a) of this 
section shall not be made for any part of such claims for which bodily 
injury or property damage results from willful misconduct by the party 
seeking payment.
    (c) The United States shall provide for payment of claims by third 
parties for bodily injury or property damage that are payable under 49 
U.S.C. 70113 and not covered by required insurance under Sec. 450.9(b), 
without regard to the limitation under paragraph (a)(1) of this 
section, because of an insurance policy exclusion that is usual. A 
policy exclusion is considered usual only if insurance covering the 
excluded risk is not commercially available at reasonable rates. The 
licensee must submit a certification in accordance with 
Sec. 450.15(c)(1)(iii) of this part for the United States to cover the 
claims.
    (d) Upon the expiration of the policy period prescribed in 
accordance with Sec. 450.11(a), the United States shall provide for 
payment of claims that are payable under 49 U.S.C. 70113 from the first 
dollar of loss up to $1,500,000,000 (as adjusted for inflation 
occurring after January 1, 1989).
    (e) Payment by the United States of excess third-party claims under 
49 U.S.C. 70113 shall be subject to:
    (1) Prompt notice by the licensee to the Office that the total 
amount of claims arising out of licensed reentry activities exceeds, or 
is likely to exceed, the required amount of financial responsibility. 
For each claim, the notice must specify the nature, cause, and amount 
of the claim or lawsuit associated with the claim, and the party or 
parties who may otherwise be liable for payment of the claim;
    (2) Participation or assistance in the defense of the claim or 
lawsuit by the United States, at its election;
    (3) Approval by the Office of any settlement, or part of a 
settlement, to be paid by the United States; and
    (4) Approval by Congress of a compensation plan prepared by the 
Office and submitted by the President.
    (f) The Office will:
    (1) Prepare a compensation plan outlining the total amount of 
claims and meeting the requirements set forth in 49 U.S.C. 70113;
    (2) Recommend sources of funds to pay the claims; and
    (3) Propose legislation as required to implement the plan.
    (g) The Office may withhold payment of a claim if it finds that the 
amount is unreasonable, unless it is the final order of a court that 
has jurisdiction over the matter.

Appendix A to Part 450--Information Requirements for Obtaining a 
Maximum Probable Loss Determination for Licensed Reentry Activities

    Any person requesting a maximum probable loss determination 
shall submit the following information to the Office, unless the 
Office has waived a particular information requirement under 14 CFR 
450.7(c):

I. General Information

    A. Reentry mission description.
    1. A description of mission parameters, including:
    a. Orbital inclination;
    b. Orbit altitudes (apogee and perigee); and
    c. Reentry trajectory.
    2. Reentry flight sequences.
    3. Reentry initiation events and the time for each event.
    4. Nominal landing location, alternative landing sites and 
contingency abort sites.
    5. Identification of landing facilities, (planned date of 
reentry), and reentry windows.
    6. If the applicant has previously been issued a license to 
conduct reentry activities using the same reentry vehicle to the 
same reentry (site) facility, a description of any differences 
planned in the conduct of proposed activities.
    B. Reentry Vehicle Description.
    1. General description of the reentry vehicle including 
dimensions.
    2. Description of major systems, including safety systems.
    3. Description of propulsion system (reentry initiation system) 
and type of fuel used.
    4. Identification of all propellants to be used and their hazard 
classification under the Hazardous Materials Table, 49 CFR 172.101.
    5. Description of hazardous components.
    C. Payload.
    1. General description of any payload, including type (e.g., 
telecommunications, remote sensing), propellants, and hazardous 
components or materials, such as toxic or radioactive substances.
    D. Flight Termination System/Flight Safety System.
    1. Identification of any flight termination system (FTS) or 
Flight safety System (FSS) on the reentry vehicle, including a 
description of operations and component location on the vehicle.

II. Flight Operations

    A. Identification of reentry site facilities exposed to risk 
during vehicle reentry and landing.
    B. Identification of accident failure scenarios, probability 
assessments for each, and estimation of risks to Government 
personnel, individuals not involved in licensed reentry activities, 
and Government property, due to property damage or bodily injury. 
The estimation of risks for each scenario shall take into account 
the number of such individuals at risk as a result of reentry 
(flight) and landing of a reentry vehicle (on-range, off-range, and 
down-range) and specific, unique facilities exposed to risk. 
Scenarios shall cover the range of reentry trajectories for which 
authorization is sought in the license application.
    C. On-orbit risk analysis assessing risks posed by a reentry 
vehicle to operational satellites during reentry.
    D. Reentry risk analysis assessing risks to Government personnel 
and individuals not involved in licensed reentry activities as a 
result of inadvertent or random reentry of the launch vehicle or its 
components.
    E. Nominal and 3-sigma dispersed trajectory in one-second 
intervals, from reentry initiation through landing or impact. 
(Coordinate system will be specified on a case by case basis)
    F. Three-sigma landing or impact dispersion area in downrange 
(+/-) and crossrange (+/-) measured from the nominal, and 
contingency landing or impact target. The applicant is responsible 
for including all significant landing or impact dispersion 
constituents in the computations of landing or impact dispersion 
areas. The dispersion constituents should include, but not be 
limited to: Variation in orbital position and velocity at the 
reentry initiation time; variation in re-entry initiation time 
offsets, either early or late; variation in the bodies' ballistic 
coefficient; position and velocity variation due to winds; and 
variations in re-entry retro-maneuvers.
    G. Malfunction turn data (tumble, trim) for guided 
(controllable) vehicles. The malfunction turn data shall include the 
total angle turned by the velocity vector versus turn duration time 
at one second interval; the magnitude of the velocity vector versus 
turn duration time at one second intervals; and an indication on the 
data where the re-entry body will impact the earth, or breakup due 
to aerodynamic loads. A malfunction turn data set is required for 
each malfunction time. Malfunction turn start times shall not exceed 
four-second intervals along the trajectory.
    H. Identification of debris casualty areas and the projected 
number and ballistic coefficient of fragments expected to result 
from each failure mode during reentry.

III. Post-Flight Processing Operations

    A. General description of post-flight ground operations 
including overall sequence and location of operations for removal of 
vehicle and components and processing equipment from the reentry 
site

[[Page 54471]]

facility and for handling of hazardous materials, and designation of 
hazardous operations.
    B. Identification of all facilities used in conducting post-
flight processing operations.
    C. For each hazardous operation:
    1. Identification of location where each operation is performed, 
including each building or facility identified by name or number.
    2. Identification of facilities adjacent to location where each 
operation is performed and exposed to risk, identified by name or 
number.
    3. Maximum number of Government personnel and individuals not 
involved in licensed reentry activities who may be exposed to risk 
during each operation. For Government personnel, identification of 
his or her employer.
    4. Identify and provide reentry site facility policies or 
requirements applicable to the conduct of operations.

Appendix B to Part 450--Agreement for Waiver of Claims and 
Assumption of Responsibility

    THIS AGREEMENT is entered into this __ day of __________, by and 
among [Licensee] (the ``Licensee''), [Customer] (the ``Customer'') 
and the Federal Aviation Administration of the Department of 
Transportation, on behalf of the United States Government 
(collectively, the ``Parties''), to implement the provisions of 
Sec. 450.17(c) of the Commercial Space Transportation Licensing 
Regulations, 14 CFR Ch. III (the ``Regulations'').
    In consideration of the mutual releases and promises contained 
herein, the Parties hereby agree as follows:

1. DEFINITIONS

    Contractors and Subcontractors means entities described in 
section 450.3 of the Regulations, 14 CFR 450.3.
    Customer means the above-named Customer on behalf of the 
Customer and any person described in Sec. 450.3 of the Regulations, 
14 CFR 450.3.
    License means License No. ______ issued on __________, by the 
Associate Administrator for Commercial Space Transportation, Federal 
Aviation Administration, Department of Transportation, to the 
Licensee, including all license orders issued in connection with the 
License.
    Licensee means the Licensee and any transferee of the Licensee 
under 49 U.S.C. Subtitle IX, ch. 701.
    United States means the United States and its agencies involved 
in Licensed Activities.
    Except as otherwise defined herein, terms used in this Agreement 
and defined in 49 U.S.C. Subtitle IX, ch. 701--Commercial Space 
Launch Activities, or in the Regulations, shall have the same 
meaning as contained in 49 U.S.C. Subtitle IX, ch. 701, or the 
Regulations, respectively.

2. WAIVER AND RELEASE OF CLAIMS

    (a) Licensee hereby waives and releases claims it may have 
against Customer and the United States, and against their respective 
Contractors and Subcontractors, for Property Damage it sustains and 
for Bodily Injury or Property Damage sustained by its own employees, 
resulting from Licensed Activities, regardless of fault.
    (b) Customer hereby waives and releases claims it may have 
against Licensee and the United States, and against their respective 
Contractors and Subcontractors, for Property Damage it sustains and 
for Bodily Injury or Property Damage sustained by its own employees, 
resulting from Licensed Activities, regardless of fault.
    (c) The United States hereby waives and releases claims it may 
have against Licensee and Customer, and against their respective 
Contractors and Subcontractors, for Property Damage it sustains, and 
for Bodily Injury or Property Damage sustained by its own employees, 
resulting from Licensed Activities, regardless of fault, to the 
extent that claims it would otherwise have for such damage or injury 
exceed the amount of insurance or demonstration of financial 
responsibility required under Secs. 440.9(c) and (e) or sections 
450.9(c) and (e), respectively, of the Regulations, 14 CFR 440.9(c) 
and (e) or 14 CFR 450.9(c) and (e).

3. ASSUMPTION OF RESPONSIBILITY

    (a) Licensee and Customer shall each be responsible for Property 
Damage it sustains and for Bodily Injury or Property Damage 
sustained by its own employees, resulting from Licensed Activities, 
regardless of fault. Licensee and Customer shall each hold harmless 
and indemnify each other, the United States, and the Contractors and 
Subcontractors of each Party, for Bodily Injury or Property Damage 
sustained by its own employees, resulting from Licensed Activities, 
regardless of fault.
    (b) The United States shall be responsible for Property Damage 
it sustains, and for Bodily Injury or Property Damage sustained by 
its own employees, resulting from Licensed Activities, regardless of 
fault, to the extent that claims it would otherwise have for such 
damage or injury exceed the amount of insurance or demonstration of 
financial responsibility required under Secs. 440.9(c) and (e) or 
Secs. 450.9(c) and (e), respectively, of the Regulations, 14 CFR 
440.9(c) and (e) or 14 CFR 450.9(c) and (e).

4. EXTENSION OF ASSUMPTION OF RESPONSIBILITY AND WAIVER

    (a) Licensee shall extend the requirements of the waiver and 
release of claims, and the assumption of responsibility, hold 
harmless, and indemnification, as set forth in paragraphs 2(a) and 
3(a), respectively, to its Contractors and Subcontractors by 
requiring them to waive and release all claims they may have against 
Customer and the United States, and against the respective 
Contractors and Subcontractors of each, and to agree to be 
responsible, for Property Damage they sustain and to be responsible, 
hold harmless and indemnify Customer and the United States, and the 
respective Contractors and Subcontractors of each, for Bodily Injury 
or Property Damage sustained by their own employees, resulting from 
Licensed Activities, regardless of fault.
    (b) Customer shall extend the requirements of the waiver and 
release of claims, and the assumption of responsibility, hold 
harmless, and indemnification, as set forth in paragraphs 2(b) and 
3(a), respectively, to its Contractors and Subcontractors by 
requiring them to waive and release all claims they may have against 
Licensee and the United States, and against the respective 
Contractors and Subcontractors of each, and to agree to be 
responsible, for Property Damage they sustain and to be responsible, 
hold harmless and indemnify Licensee and the United States, and the 
respective Contractors and Subcontractors of each, for Bodily Injury 
or Property Damage sustained by their own employees, resulting from 
Licensed Activities, regardless of fault.
    (c) The United States shall extend the requirements of the 
waiver and release of claims, and the assumption of responsibility 
as set forth in paragraphs 2(c) and 3(b), respectively, to its 
Contractors and Subcontractors by requiring them to waive and 
release all claims they may have against Licensee and Customer, and 
against the respective Contractors and Subcontractors of each, and 
to agree to be responsible, for any Property Damage they sustain and 
for any Bodily Injury or Property Damage sustained by their own 
employees, resulting from Licensed Activities, regardless of fault, 
to the extent that claims they would otherwise have for such damage 
or injury exceed the amount of insurance or demonstration of 
financial responsibility required under Secs. 440.9(c) and (e) or 
Sec.  450.9(c) and (e), respectively, of the Regulations, 14 CFR 
440.9(c) and (e) or 14 CFR 450.9(c) and (e).

5. INDEMNIFICATION

    (a) Licensee shall hold harmless and indemnify Customer and its 
directors, officers, servants, agents, subsidiaries, employees and 
assignees, or any or them, and the United States and its agencies, 
servants, agents, subsidiaries, employees and assignees, or any or 
them, from and against liability, loss or damage arising out of 
claims that Licensee's Contractors and Subcontractors may have for 
Property Damage sustained by them and for Bodily Injury or Property 
Damage sustained by their employees, resulting from Licensed 
Activities.
    (b) Customer shall hold harmless and indemnify Licensee and its 
directors, officers, servants, agents, subsidiaries, employees and 
assignees, or any or them, and the United States and its agencies, 
servants, agents, subsidiaries, employees and assignees, or any of 
them, from and against liability, loss or damage arising out of 
claims that Customer's Contractors and Subcontractors, or any person 
on whose behalf Customer enters into this Agreement, may have for 
Property Damage sustained by them and for Bodily Injury or Property 
Damage sustained by their employees, resulting from Licensed 
Activities.
    (c) To the extent provided in advance in an appropriations law 
or to the extent there is enacted additional legislative authority 
providing for the payment of claims, the United States shall hold 
harmless and indemnify Licensee and Customer and their respective 
directors, officers, servants, agents, subsidiaries, employees and 
assignees, or any of them, from and against liability, loss or 
damage arising out of claims that Contractors

[[Page 54472]]

and Subcontractors of the United States may have for Property Damage 
sustained by them, and for Bodily Injury or Property Damage 
sustained by their employees, resulting from Licensed Activities, to 
the extent that claims they would otherwise have for such damage or 
injury exceed the amount of insurance or demonstration of financial 
responsibility required under Secs. 440.9(c) and (e) or 450.9(c) and 
(e), respectively, of the Regulations, 14 CFR 440.9 (c) and (e) or 
14 CFR 450.9(c) and (e).

6. ASSURANCES UNDER 49 U.S.C. 70112(e)

    Notwithstanding any provision of this Agreement to the contrary, 
Licensee shall hold harmless and indemnify the United States and its 
agencies, servants, agents, employees and assignees, or any of them, 
from and against liability, loss or damage arising out of claims for 
Bodily Injury or Property Damage, resulting from Licensed Launch 
Activities, regardless of fault, except to the extent that: (i) As 
provided in section 7(b) of this Agreement, claims result from 
willful misconduct of the United States or its agents; (ii) claims 
for Property Damage sustained by the United States or its 
Contractors and Subcontractors exceed the amount of insurance or 
demonstration of financial responsibility required under 
Sec. 440.9(e) or Sec. 450.9(e) of the Regulations (14 CFR 440.9(e) 
or 450.9(e)); (iii) claims by a Third Party for Bodily Injury or 
Property Damage exceed the amount of insurance or demonstration of 
financial responsibility required under Sec. 440.9(c) or 
Sec. 450.9(c) of the Regulations (14 CFR 440.9(c) or 450.9(c)), and 
do not exceed $1,500,000,000 (as adjusted for inflation after 
January 1, 1989) above such amount, and are payable pursuant to the 
provisions of 49 U.S.C. 70113 and Sec. 440.19 or Sec. 450.19 of the 
Regulations (14 CFR 440.19 or 450.19); or (iv) Licensee has no 
liability for claims exceeding $1,500,000,000 (as adjusted for 
inflation after January 1, 1989) above the amount of insurance or 
demonstration of financial responsibility required under 
Sec. 440.9(c) or Sec. 450.9(c) of the Regulations (14 CFR 440.9(c) 
or 450.9(c)).

7. MISCELLANEOUS

    (a) Nothing contained herein shall be construed as a waiver or 
release by Licensee, Customer or the United States of any claim by 
an employee of the Licensee, Customer or the United States, 
respectively, including a member of the Armed Forces of the United 
States, for Bodily Injury or Property Damage, resulting from 
Licensed Activities.
    (b) Notwithstanding any provision of this Agreement to the 
contrary, any waiver, release, assumption of responsibility or 
agreement to hold harmless and indemnify herein shall not apply to 
claims for Bodily Injury or Property Damage resulting from willful 
misconduct of any of the Parties, the Contractors and Subcontractors 
of any of the Parties, and in the case of Licensee and Customer and 
the Contractors and Subcontractors of each of them, the directors, 
officers, agents and employees of any of the foregoing, and in the 
case of the United States, its agents.
    (c) In the event that more than one customer is involved in 
Licensed Activities, references herein to Customer shall apply to, 
and be deemed to include, each such customer severally and not 
jointly.
    (d) This Agreement shall be governed by and construed in 
accordance with United States Federal law.
    In Witness Whereof, the Parties to this Agreement have caused 
the Agreement to be duly executed by their respective duly 
authorized representatives as of the date written above.

LICENSEE

By:
Its:

CUSTOMER

By:
Its:

DEPARTMENT OF TRANSPORTATION

    Issued in Washington, DC on September 24, 1999.
Patricia G. Smith,
Associate Administrator for Commercial Space Transportation.
[FR Doc. 99-25457 Filed 10-5-99; 8:45 am]
BILLING CODE 4910-13-P