Much of the commercial suborbital industry has argued for the need of legislation like HR 5382. (credit: XCOR Aerospace)

The costs and benefits of less-than-perfect legislation

by Nathan Horsley
Monday, November 22, 2004

There has been a dull roar of late over HR 5382, the new compromise version of the former HR 3752. After substantial debate, the bill managed to gain the two-thirds majority needed to pass in the House in a roll-call vote Saturday. The bill now awaits a Senate vote and appears likely to pass, but this is not yet a done deal as any vocal opposition could be enough to stall the bill through the end of the session. As has been reported in several places, two House members, James Oberstar (D-MN) and Peter DeFazio (D-OR), caused the most recent attempted obstruction in the House. Based on the text of the House debate on Friday, their opposition to the bill seems to have been based on viewing the suborbital tourism industry through the lens of the air transportation industry. Both men were unwilling to allow legislation they characterized as representing the “tombstone mentality” of waiting for accidents rather than protecting against them.

In an example of the irony that often manifests itself in policy-making, as I first read over the proposed bill I had to agree with the decision to oppose the bill, but for the opposite reason. I was deeply concerned that the legislation was entirely too concerned with the safety of persons who have demonstrated a great desire to assume the very risks the two opposing Representatives desire to protect them from. On further reflection and reference to the opinions of industry representatives, I have come to conclusion that the proposed legislation is useful enough to continue pushing for passage. However, should something happen to block the legislation this year, I remain confident that the good people down at the FAA’s Office of Commercial Space Transportation (FAA/AST) will be able to move forward with the licensing of passenger vehicles under the current regime.

The rhetorical justification that is usually heard in discussions of the need for new legislation is that the suborbital industry requires clarification of the licensing scheme in order to attract investors who are skittish about regulatory costs and litigation risks. This is true on the most basic level; it would be easier for startups who have not demonstrated technology to attract cash if the technical, insurance, and risk assumption requirements were fully spelled out and applied to commercial passenger vehicles. However, at the same time, the existence of Mojave Aerospace Ventures (the Paul Allen-Scaled Composites venture that developed SpaceShipOne), Armadillo Aerospace, XCOR, Blue Origin, and many others show that there are investors willing to work with companies under the current regime. Furthermore, the success of SpaceShipOne and the ensuing rush to sign up for flights on Virgin Galactic show that there are plenty of customers who are willing to work with companies who can successfully demonstrate launch technology.

While attracting even more investors is a plus, there is a limit to the number of companies that will be able to thrive in the existing market and there is a strong argument that what we need now is not more companies, but rather for the existing companies to demonstrate the concepts that already exist. The question then is whether the proposed bill will aid in this effort, either by attracting cash that can speed up development efforts or by easing the regulatory process. An answer to this question requires a more detailed accounting of the benefits and costs of the proposed legislation. Hang on people, it’s going to be a bumpy ride.

The benefits of passing HR 5382

The most logistically important provisions in HR 5382 are the experimental vehicle permit clauses. Under the current regime, a launcher must meet all, or at least most, of the costly and time-consuming licensing guidelines just to test its new vehicle. Under the proposed bill, they will be subject to less exacting standards in order to test new technologies, train crew, or fly working vehicles in the process of gaining a full license for paying customers. They won’t be able to take on paying customers on these flights, but that is only logical given the experimental nature of the craft. This one element is the major cost saving aspect of the proposed legislation, and it is hugely significant for many small businesses that want to test new vehicle concepts.

However, even this groundbreaking procedure is not quite as revolutionary as it sounds. The license awarded to XCOR during the Space Access ’04 Conference shows many of the characteristics of an experimental vehicle permit. Under their license XCOR is allowed 35 flights over two years. This is substantially more flights than have been allowed under previous licenses. By way of comparison, the experimental permit system would allow for an unlimited number of flights with the only limit on time being that the permit is revoked when a license is awarded. The XCOR license even allows for flights for pay after the initial test flights, although not involving passengers. This is actually less restrictive than the proposed permit system, which would not allow a launcher to accept payment for any type of payload. It is impossible to tell if the technical requirements of the license were simplified given that it has not been publicly released, but we do know that at least the requirement for advance knowledge of the trajectories was waived, thus giving XCOR a significant degree of freedom in adapting test mission profiles on the fly.

Other significant positive changes made by the new licensing bill are codifications of changes in definitions. That most significant make it clear that the AST is the designated agency with sole authority to license commercial flights carrying crew and space flight participants. This is useful, but it is really just a codification of current practice. AST already advertises itself as a “one-stop shop” for commercial launch licenses (the reality of this is slightly different in that a launcher must still apply for export licenses, ATF authorizations, and other authorizations, but the proposed bill does not simplify this process). The licenses awarded to both Scaled Composites and XCOR allowed for crew to be carried on the vehicles. This means that AST already is willing to interpret the “payload” language of the current laws to include humans, and there has been no challenge to this interpretation.

Another significant codification is the definition of “suborbital rocket”. You may remember this as the initial reason HR 3752 was held up earlier this year. While this is an important step in that it clarifies whether a craft will be subject to certification as an aircraft or licensing as a launch vehicle, this is again merely the codification of a definition AST has been publicly using for over a year. The more significant step related to this issue is the provision of HR 5382 that ensures each craft will only be subject to one license or permit. However, even the relevance of this provision is unclear since the language does not mention aircraft certifications. The White Knight vehicle currently requires both a launch license and an experimental airworthiness certificate. Under the new bill this need for dual regulation may still exist, although the single license provision would strengthen the statutory basis for using only one regulatory scheme.

Finally, the proposed bill is touted for its clarification of the risk-sharing regime. Under the existing regime the licensee, the customer, its employees, and its subcontractors all are required to waive any claim to damages against each other and to the government. There are a number of legal mechanisms involved, but the bottom line is that each participating party assumes its own risks. Under the proposed bill, this system remains virtually the same. The difference is that space flight participants are clearly included as participants in the launch who have to assume their own risks, rather than third parties who could sue in case of damage. As with most of the “changes” made in the bill, it is nice to see this clearly laid out, but the result would most likely be no different under the existing regime. It would be silly to argue that companies purchasing the launch of a satellite are participants, but people who purchase the launch of themselves are not participants. Sure, the silliness of an argument has rarely stopped a lawyer from presenting it (as I am lawyer I can say this with some confidence), but what matters is that anyone attempting this argument would almost certainly lose.

With this in mind, the only addition to the risk-sharing regime that goes beyond existing practice actually exposes the launcher to more risk. The new bill states that the government will not indemnify the launcher in case of suit by a space flight participant. This doesn’t have much impact, however, since the participant will have signed away his right to sue anyway. The only time this would come into play is if the launcher intentionally injured the passenger (or potentially in some jurisdictions if the launcher was grossly negligent), in which case the agreement to waive damage claims does not apply.

page 2: the dangers of passing HR 5382 >>