[Federal Register Volume 66, Number 53 (Monday, March 19, 2001)]
[Notices]
[Pages 15520-15523]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-6697]


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DEPARTMENT OF TRANSPORTATION

[Docket No. FAA-2001-9119]


Federal Aviation Administration

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of public meeting.

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SUMMARY: The FAA will convene a two-day public meeting addressing 
liability and risk-sharing for commercial space launch and reentry 
activities. Public views obtained at the meeting will be included in a 
report to Congress. In layman's terms, the report is intended to 
include a variety of views and comments concerning whether the 
government should continue to provide the potential for assurance of 
financial risk-based support beyond insurance

[[Page 15521]]

that launch licensees are required to obtain. The report will provide 
background and information on the appropriateness and effectiveness of 
current risk-sharing arrangements under law, and the need to continue 
or modify laws governing liability risk-sharing for commercial launches 
and reentries beyond December 31, 2004.

DATES: The meeting will take place on April 25-26, 2001, from 9:00 am 
to 4:30 pm, and will continue thereafter during a two week on-line 
public forum accessible through the Internet.

ADDRESSES: The meeting will take place in the FAA Auditorium, located 
at 800 Independence Avenue, SW., 3rd floor, Washington, DC 20591. 
Further information regarding the on-line public forum will be provided 
by public notice approximately three weeks before the public meeting. 
Persons unable to participate in either the public meeting or the on-
line public forum may mail or deliver views, in writing and in 
duplicate, to the U.S. Department of Transportation Dockets, Docket No. 
FAA-2001-9119, 400 Seventh Street, SW., Washington, DC, 20590, or may 
do so electronically by sending them to the Documents Management 
Systems (DMS) at the following Internet address: http://dms.dot.gov/, 
by May 11, 2001. Written views, as well as a transcript of the public 
meeting, may be examined in Room PL 401 at the U.S. Department of 
Transportation, 400 Seventh Street, SW., Washington, DC, 20590, between 
10 am and 5pm weekdays except Federal holidays.

FOR FURTHER INFORMATION CONTACT: Ms Esta M. Rosenberg, Senior Attorney-
Advisory, Regulations Division, Office of the Chief Counsel, Federal 
Aviation Administration, U.S. Department of Transportation (202) 366-
9320, or Mr. Ronald K. Gress, Manager, Licensing and Safety Division, 
Associate Administrator for Commercial Space Transportation, Federal 
Aviation Administration, U.S. Department of Transportation (202) 267-
7985.

SUPPLEMENTARY INFORMATION:

Background

    Congress has directed the Secretary of Transportation to conduct a 
comprehensive and multi-faceted study of the liability risk-sharing 
regime applicable to U.S. commercial space transportation. Under 
delegated authority, the Federal Aviation Administration (FAA)'s 
Associate Administrator for Commercial Space Transportation (AST) is 
responsible for preparing the report required by the Commercial Space 
Transportation Competitiveness Act of 2000 (referred to in this Notice 
as the Space Competitiveness Act ), Public Law 106-405. The report 
contents, as prescribed by Congress, are delineated below and must 
present the views of interested Federal agencies as well as the public. 
The purpose of the public meeting is to elicit views from interested 
members of the public regarding the different aspects of risk sharing 
required to be addressed in the report and to do so in a public forum. 
There will be other opportunities for the interested public to provide 
input to the FAA. These include an on-line public forum that will 
continue for two weeks following the public meeting and future 
opportunities to submit views, in writing, to the FAA.
    The Space Competitiveness Act, enacted in October 2000, extends for 
an additional 4-year term the existing statutory liability risk-sharing 
regime for commercial space transportation, popularly referred to as 
indemnification. Under the statutory program, FAA-licensed operators 
conducting space launch and reentry activities share with the U.S. 
Government the risk of liability, chiefly to uninvolved persons, for 
injury, damage or loss associated with licensed operations. Originally 
due to expire in 1993, the indemnification provisions of 49 USC 
Subtitle IX, chapter 701, popularly referred to as the Commercial Space 
Launch Act or CSLA, were extended in 1993, for an additional six years, 
followed by a one year extension in 1999. Passage in 2000 of the Space 
Competitiveness Act ensures that FAA-licensed operators will be 
eligible for indemnification under statutorily prescribed procedures 
through the year 2004, and for some time thereafter as long as their 
substantially complete launch or reentry license application has been 
submitted to the FAA by the end of 2004. The most recent extension of 
the indemnification provisions was accompanied by the requirement to 
prepare a comprehensive report on the need to continue further, beyond 
the year 2004, the risk-sharing scheme of the CSLA in its present or 
modified form.
    The U.S. commercial launch industry has had an impressive safety 
record. There has never been a request for indemnification under the 
statutory program. In fact, the FAA is unaware of any third-party 
claims having been processed under the statutorily-directed financial 
responsibility program. Nevertheless, since the statutory risk 
allocation program was first enacted by Congress in 1988, U.S. launch 
operators have maintained that indemnification is critical to their 
ability to conduct launch operations without ``betting the company'' 
and to compete successfully with foreign launch services providers 
offering customers government-backed assurances that their liability 
exposure will be covered without risk or additional cost to the 
customer. The report mandated by the Space Competitiveness Act is 
intended to facilitate congressional consideration of a further 
extension of the existing program, and the need for any changes to the 
program, when it next expires December 31, 2004.

Liability Risk-Sharing for U.S. Commercial Space Transportation

Activities

    Indemnification is one element of a comprehensive risk allocation 
program detailed in the CSLA and explained in final rules issued by the 
FAA to implement the statute. (See ``Financial Responsibility 
Requirements for Licensed Launch Activities; Final Rule,'' 63 FR 45592-
45625, issued August 26, 1998, and ``Financial Responsibility 
Requirements for Licensed Reentry Activities; Final Rule,'' 65 FR 
56670-56705, issued September 19, 2000. Both rulemaking documents are 
available by accessing AST's Internet home page: http://ast.faa.gov.) 
The FAA's financial responsibility regulations for commercial space 
transportation are codified at 14 CFR parts 440 and 450.
    Under a three-tiered approach to risk allocation, launch and 
reentry licensees are effectively relieved of the risk of potentially 
catastrophic and unlimited liability associated with hazardous launch 
or reentry operations. The first tier of liability risk is that having 
the greatest likelihood of occurrence. It is managed through an FAA 
requirement for a demonstration of financial responsibility, typically 
private liability insurance purchased by a licensee authorized to 
conduct a launch or reentry. The liability to third parties of all 
participants, including the U.S. Government, involved in a licensed 
launch or reentry must be covered by the licensee's insurance. The 
amount of coverage is prescribed by the FAA based on an assessment of 
risk, known as a maximum probable loss analysis, to third parties and 
third-party or uninvolved property, up to a statutory limit of $500 
million.
    The second tier of liability risk is for losses to third parties 
and third-party or uninvolved property in excess of required insurance. 
Under the current statutory scheme, responsibility for covering excess 
claims is allocated to the Government under a procedure,

[[Page 15522]]

known as indemnification, whereby Congress may appropriate up to $1.5 
billion, as adjusted for post-January 1, 1989 inflation, to cover 
successful third-party claims under a compensation plan prepared by the 
FAA and submitted by the President.
    This arrangement benefits all participants in licensed launch and 
reentry activities, including the Government at no cost to the 
Government. Coverage of the Government's responsibility for damage or 
loss to third parties is significant because of its liability exposure 
as a participant in supporting launches and reentries at federal ranges 
and as a signatory to the Outer Space Treaties. Specifically, under the 
Convention on International Liability for Damage Caused by Space 
Objects (Liability Convention), the United States is absolutely liable 
for damage caused on Earth or to aircraft in flight, outside of U.S. 
territory, when the United States is a launching State under the terms 
of the Outer Space Treaties. The current statutory liability risk-
sharing regime ensures that the Government's treaty-based financial 
responsibility for commercial launch and reentry activities will, in 
all probability, be satisfied by private insurance and without cost to 
the U.S. taxpayer.
    Above the combined amount of insurance plus congressionally 
authorized payment, or indemnification, responsibility for covering 
third-party liability returns to the licensee or other liable party. As 
a general matter, managing the third tier of liability risk is 
therefore the responsibility of commercial entities involved in 
licensed activity.
    Indemnification under the CSLA ensures that relief will be 
available to compensate injured persons not involved in space activity 
but who suffer damage or loss as a result of a launch or reentry 
accident, as well as Government personnel as defined by FAA 
regulations, who suffer loss or injury in supporting a commercial 
launch or reentry. Only successful claims for third-party injury, 
damage or loss may be eligible for Government indemnification. 
Indemnification does not cover claims for damage or loss to a launch 
vehicle or reentry vehicle, or to a satellite or other payload. Nor is 
it intended to cover losses sustained by employees of commercial 
entities involved in licensed activity. As explained in the above-
referenced rulemaking documents, private entities involved in a 
licensed launch or reentry are responsible for managing their own 
damage or loss and that of their employees. To ensure this result, the 
CSLA directs certain contractual arrangements among the various launch 
or reentry participants to address the risk of damage or loss to their 
property and personnel involved in launch or reentry activities. FAA 
regulations include a contractual agreement, known as an ``Agreement 
for Waiver of Claims and Assumption of Responsibility,'' documenting 
this arrangement among the various participants. (See appendix B to 14 
CFR parts 440 and 450, respectively.) The statutory risk-sharing 
program does not dictate risk management decisions for private entities 
involved in space activities beyond the required waiver of claims 
agreement just described. An owner of a launch or reentry vehicle or 
payload may choose to insure its property through private insurance, or 
not.
    The current statutory liability risk-sharing regime has been 
credited with reducing launch costs by virtue of requirements for 
comprehensive insurance covering all participants, and by significantly 
limiting the threat of litigation and its associated costs among 
participants in licensed activity. It has also been cited as a critical 
component in building the international competitiveness of the U.S. 
space transportation industry by placing U.S. launch services providers 
on a more equal footing with their competition. For example, 
Arianespace, still the primary competitor of the U.S. launch industry, 
continues to offer customers full indemnification by the French 
Government for third-party liability that exceeds required insurance of 
400 million French francs (currently, approximately $80 million).
    Recently, the statutory risk-sharing regime was extended to reentry 
vehicles, including reusable launch vehicles (RLVs), through enactment 
of the Commercial Space Act of 1998. Although no commercial RLV concept 
is sufficiently mature for FAA licensing consideration, extension of 
the risk-sharing program to licensed reentry activities has been 
regarded as critical to RLV development and ability to operate 
commercially, just as it was to the ability of U.S. industry to offer 
commercial expendable launch vehicle services beginning in the late 
1980s through the present.

Report Requirements

    Seven specific areas of study and analysis are identified in the 
Space Competitiveness Act and the FAA seeks public views on each of 
them. Although recommendations on appropriate modifications to existing 
law are required as part of the report, the FAA is advised that the 
principal purpose of the report is to provide an understanding of the 
factual and legal bases for continuing or modifying the indemnification 
and statutory risk-sharing program, as opposed to formulation of policy 
that may involve statutory changes.
    The seven areas of study are listed below along with some 
associated issues preliminarily identified by the FAA to stimulate, but 
not limit or direct, consideration of the issues by the public. The 
report mandated by the Space Competitiveness Act is broad in its 
required scope and coverage and the interested public is urged to 
explore the issues in depth. For this reason, the FAA is providing 
weeks of advance notice of the public meeting. The report shall:
    1. Analyze the adequacy, propriety, and effectiveness of, and the 
need for, the current liability risk-sharing regime in the United 
States for commercial space transportation.
    2. Examine the current liability and liability risk-sharing regimes 
in other countries with space transportation capabilities.
    As previously noted, Arianespace offers customers government-backed 
relief from liability risk exposure arising out of a launch accident. 
Other governments offer varying forms of financial support to address 
potential liability of launch providers and their customers. The FAA 
seeks information and public views on the ability of U.S. launch 
services providers to compete effectively with foreign providers in the 
context of the current risk-sharing regime and their ability to 
continue to do so if the regime were absent or modified. Specifically, 
the FAA is interested in the impact indemnification has on the ability 
of U.S. providers to attract and retain customers, both foreign and 
domestic, under the present scheme and the potential effects ending or 
changing the current scheme could have on sustaining and enhancing the 
international competitiveness of the U.S. space transportation 
industry.
    3. Examine the appropriateness of deeming all space transportation 
activities to be ``ultrahazardous activities'' for which a strict 
liability standard may be applied and which liability regime should 
attach to space transportation activities, whether ultrahazardous 
activities or not.
    Government indemnification has been made available to industries 
that have been deemed ultrahazardous in nature, such as nuclear energy 
generation, and subject by courts to a strict liability standard. 
Similarly, under special provisions, such as Public Law 85-804, 
government contractors engaging in

[[Page 15523]]

unusually hazardous activities for the government may receive 
assurances of government indemnification above the limit of insurance 
that is available at reasonable cost. Where a strict liability standard 
applies, liability is not based upon a lack of care on the part of the 
entity conducting the activity. Rather, liability is found because of 
the dangerous and risky nature of the activity. Indemnification under 
such circumstances is desirable to an operator to address the 
potentially unlimited or open-ended liability that would attach in the 
event of injury, damage or loss to third parties.
    In the context of a licensed launch in the United States, 
consisting of certain pre-flight ground operations as well as ignition 
and flight of a launch vehicle, is the current liability risk-sharing 
regime necessary and appropriate for all licensed launches and launch 
activities? The FAA is interested in information and public views as to 
whether it is reasonable and appropriate to separate licensed 
activities that may be deemed ultrahazardous and therefore subject to a 
strict liability standard by a court from those that would not be so 
considered.
    4. Examine the effect of relevant international treaties on the 
Federal Government's liability for commercial space launches and how 
the current domestic liability risk-sharing regime meets or exceeds the 
requirements of those treaties.
    As stated above, the United States accepts liability for certain 
damage when it is a launching State under the Outer Space Treaties, 
that is, when it launches or procures the launch of a space object or 
when the launch takes place from U.S. territory or a U.S. facility. 
(Liability Convention, Article I.) A ``space object'' includes 
component parts of a space object as well as its launch vehicle and 
parts thereof. Id. Liability for damage on the ground or to aircraft in 
flight outside of U.S. territory is absolute, but is fault-based when 
damage occurs elsewhere, such as in outer space. In the latter 
instance, the government is liable if the damage is due to the fault of 
the government or persons for whom the government is responsible. 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,'' a State Party to the treaty bears 
international responsibility for activities in outer space carried on 
by non-governmental entities. Such activities require authorization and 
continuing supervision by the appropriate State Party to the treaty. 
(Emphasis added.)
    By regulation, the FAA requires launch insurance for a term of 30 
days following a licensed launch; however, the Government's liability 
as a signatory to the Outer Space Treaties may extend beyond the event 
of conducting a launch or reentry. The FAA seeks information and public 
views on the adequacy of the existing statutory and regulatory program 
in light of treaty obligations undertaken by the United States. The 
Outer Space Treaties are available by accessing the United Nations 
Internet site.
    5. Examine the appropriateness, as commercial reusable launch 
vehicles enter service and demonstrate improved safety and reliability, 
of evolving the commercial space transportation liability regime 
towards the approach of the airline liability regime.
    The airline liability regime differs from that applicable to 
commercial space transportation in several ways. Unlike its acceptance 
of an international liability regime applicable to damage on the ground 
or to aircraft resulting from certain space activities when the United 
States is a launching State under the Liability Convention as explained 
in item 4, above, the United States has not accepted a comparable 
regime for airline liability and is not party to a multilateral 
agreement under which the U.S. Government accepts financial 
responsibility for covering damage on the ground arising out of civil 
aircraft operation. Department of Transportation economic regulations 
require U.S. and foreign air carriers to have liability insurance 
coverage in certain minimum amounts, on a per person and per occurrence 
basis, to cover injury, loss or damage to the traveling public and 
persons on the ground. See 14 CFR parts 205 and 298. There is no 
provision for government indemnification of commercially operated civil 
aircraft for third-party liability above required insurance. The FAA 
seeks information and views from the public on the appropriateness and 
adequacy of transitioning management of liability for space launch and 
reentry vehicle operations to a program resembling that used to address 
airline liability. What factors should be considered in determining 
whether and when it would be appropriate to do so?
    6. Examine the need for changes to the Federal Government's 
indemnification policy to accommodate the risks associated with 
commercial spaceport operations.
    Licensed launch site and reentry site operators, popularly referred 
to as spaceports, currently participate in the liability risk-sharing 
regime as a contractor to the launch or reentry licensee when their 
site is used to support a licensed launch or reentry. If a launch 
accident occurred, for example, insurance obtained by the launch 
licensee would cover claims of third parties against the licensed 
launch site operator and that operator would be eligible for government 
payment of excess claims, or indemnification, if third-party claims 
exceeded the required amount of insurance. At other times, such as when 
there is no launch vehicle present, the CSLA does not provide statutory 
authority for payment by the Government of third-party claims resulting 
from operation of a launch or reentry site separate from licensed 
launch or reentry activities. Those risks are managed in the same 
manner as other industrial risks, that is, as part of an operator's 
business plan for managing the risk of liability through insurance or 
other financial protection. The FAA seeks information and public views 
on the adequacy of the existing statutory scheme as it affects licensed 
launch site and reentry site operators.
    7. Recommend appropriate modifications to the commercial space 
transportation liability regime and the actions required to accomplish 
those modifications.

Public Meeting Format

    Interested members of the public are invited to participate in the 
public meeting by offering views on any or all of the areas of study 
identified above. In order to assure all participants an opportunity to 
present views, persons interested in participating in the meeting 
should reserve time for their presentations by contacting AST directly 
at (202) 267-7793.
    Additional information regarding the on-line public forum, as well 
as additional details concerning the public meeting, will be made 
available in the weeks preceding the public meeting through notice in 
the Federal Register and on the AST Internet home page: http://ast.faa.gov.

    Issued in Washington, DC on March 12, 2001.
Joseph A. Hawkins,
Acting Associate Administrator for Commercial Space Transportation.
[FR Doc. 01-6697 Filed 3-16-01; 8:45 am]
BILLING CODE 4910-13-U