[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]]
_______________________________________________________________________
Part IV
Department of Transportation
_______________________________________________________________________
Federal Aviation Administration
_______________________________________________________________________
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.
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\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.
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\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.
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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.
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\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
