Status Report

Testimony of Henry R. Hertzfeld Jr.: The Commercial Space Act of 2003

By SpaceRef Editor
November 5, 2003
Filed under , ,








NOVEMBER 5, 2003

Government supervision and regulation of all space flight is mandatory. The Congress has an obligation to insure that commercial space flight is as safe as possible for all parties involved and that innocent parties both domestically and internationally are protected. Virtually all space activities are global. By treaty, each nation is responsible for the actions of their citizens in space. And, it is simply common sense in today’s security and defense environment that the advanced technological capabilities needed to get to space will require government knowledge and supervision of those activities, whether they be for governmental or for commercial purposes. Finally, one must travel through air space to get to outer space, which will require close coordination, but not necessarily integration, with the existing regulations for aviation.

Only recently has the prospect of commercial human space flight been seriously proposed. This could develop into a new business opportunity in the coming years. In order to encourage commercial activity, the Government should be neutral as possible to investors in new space activities—neither subsidizing them nor adding new financial regulations to the actual investment. The risks of commercial space flight are two-fold: financial for investors and injury to people and property. The Government does have an obligation to insure that commercial space companies fully protect non-participants and government property while maintaining some basic standards for the safety of its employees and customers.

Up to now most commercial space activity has included a significant amount of government use (mainly communications and remote sensing satellites), which provides at least some excuse for a continuing government indemnification liability.

However, purely commercial human space flight, whether sub-orbital or in-orbit has no dual-use purpose. Its market will be adventure-seekers or sightseers and private investors will incur the profits or losses. The private company has a business interest and an obligation to cover all potential liabilities as would be prudent for any profit-oriented enterprise in any industry.

Therefore, the U.S. Government should have no obligation to subsidize this type of commercial activity and should incur no financial risks from the activities of U.S. citizens involved in commercial human space travel.

This means that the current form of indemnification for space activities as enumerated by the FAA in its regulations on financial responsibility will have to be changed. At present, the FAA determines the maximum probable exposure for third-party liability from a commercial launch activity and requires the private company to indemnify that activity up to that amount (which can be as high as $500 million per flight). Between that figure and a cap of $1.5 billion, the U.S. Government is obligated to pay for third party damage. Above the cap, the payment options are not specified. The types of changes I propose would shift the entire liability for commercial human sub-orbital and in-orbit activity to the firm. Although the cost of insurance might discourage some from entering this industry, this cost is only a relatively small fraction of the total cost of a launch and would be included in the price of a launch. Those incurring the risk should be willing to pay for the risk, particularly where there is no direct Government benefit from the activity.

H.R. 3245, as it is now drafted, may establish several bad precedents. It perpetuates the conflict within the FAA/AST of being both a promoter and regulator of the industry. It takes a piecemeal approach to regulation by focusing on commercial human space activities rather than considering the entire spectrum of future aviation, sub-orbital, and orbital commercial activities in a comprehensive and cohesive framework. And it proposes a definition of space and aviation activitiy that fails to adequately separate regulatory functions and jurisdiction.

Currently the Office of Commercial Space Transportation at the FAA has a dual role of promoting the ELV (and RLV) industry as well as regulating it. Regulations by their very nature may counter promotional activities. As commercial space activities expand (e.g. commercial human sub-orbital and eventually possible orbital flights), these two roles become even more difficult to accomplish within the same Office than before. I believe the time has come to separate these activities. Promotion of U.S. industry has traditionally been the province of the U.S. Department of Commerce. If the DOT/FAA is to regulate space without conflict, the promotional activities should be transferred elsewhere.

And, there is another serious conflict brewing within the FAA regulatory environment itself. The history of the development of space is very different from that of aviation. The legal structure of the two sectors is also very different. Even though one must fly through air to get to space, the same companies build both aircraft and spacecraft, and the Government R&D structure in aerospace is focused in one agency, that does not mean that the two activities are the same and should be regulated by the same agency. As it now stands, different offices within the FAA must compete for regulatory authority. As commercial space matures, the conflicts will become much greater. This is wasteful, and will lead to suboptimal solutions for the aviation industry, for the space industry, and for U.S. competitiveness internationally.

H.R. 3245 only addresses commercial human space flight. Other new developments that will affect both aviation and space include: high altitude platforms that may have functions that compete with low earth orbit satellites, unmanned aircraft, space launches that use airplanes for first stages, etc. Also, by separating commercial human space activities from the transportation of cargo into sub-orbital and orbital locations, different regulations could emerge for virtually identical physical launches. The borders between aviation and space and the regulatory framework will become fuzzy.

In fact, the potential of using high altitudes (those higher than current commercial airplanes use, but lower than entering orbit) for purposes other than transporting people from one point on earth to another is an area that has great commercial (and security) potential. Regulations currently are not well formulated about the commercial use of these altitudes. It appears that the uses of these altitudes will be functionally and competitively closer to space uses than aviation, but the means of getting there may be more like aircraft than spacecraft. As this activity develops, the question of where and how it should be regulated is open to debate. Because commercial human space activity is only one part of this debate, setting precedents now for the regulation of these activities in a piecemeal fashion may create disincentives and confusion for other near-term innovative commercial activities in this region of the atmosphere. I would recommend that the Congress study the entire spectrum of space supervision and regulation options.

One option that the Congress might consider would be to establish an independent regulatory agency for space activities on the model of the FCC or the NRC. This would separate the promotion of commercial space from its regulation. And the problems of air vs. space regulation could be coordinated through actions of two equally independent and separate organizations. This would eliminate wasteful turf wars within an agency and would not prematurely force space regulations into aviation regulation, which, as it is now formulated, is not the appropriate model for space activities.

The as yet unresolved problem of what should classified under aviation and what should be space for regulatory actions has always been a contentious situation with many proposals but no solutions. H.R. 3245 addresses this issue by using a definition that has now been proposed by the FAA in a proposed rulemaking in the Federal Register (Vol. 68, No. 202, October 20, 2003). Previous attempts at definitions have focused on either a physical description of where space begins or on a functional approach. The physical definition is imprecise. The functional approach is the one most commonly used where if an activity is meant to reach outer space it is regulated as a space activity (even if it never reaches space). If it is not destined for outer space, then it is regulated under aviation regulations, where appropriate.

The proposed definition is still not the solution to the problem. Other problems and issues are raised by the construction of a definition based on the design of the vehicle involved. One issue involves regulating the payload—the ultimate reason for the launch. Currently the FAA reviews each payload for safety. Will a definition of space that is based on the vehicle lead to unintended increased jurisdiction over payloads as well? Another issue is the situation where a commercial firm could be required to obtain both an aviation certification and a space launch license. This likely will be expensive and time consuming. It is also counter to the intent of Congress to create a simpler, more commercially friendly regulatory regime that encourages firms to engage in innovative space and aviation activities and encourages future financial commitments from both entrepreneurs and from the investment community.

In conclusion, until the reliability of space vehicles improves greatly, it is clear that the commercial space launch industry is not mature nor is it similar enough to commercial aircraft to be part of the aviation regulatory regime. The current FAA space launch licensing regime is oriented toward issuing a license for each space mission (i.e. launch), while in the aviation world a Certification of Flight Worthiness certifies that a particular vehicle is safe to fly commercially. By creating an independent space regulatory agency that could include authority over commercial human space activity as well as high altitude activities (at least those that are not related to transporting humans from one point to another on earth), the pressures to move too quickly toward integration with aviation regulation would be eased.

At some future time it is possible that aviation systems and space systems can be handled together. That time is yet to come, and by forcing round pegs into square holes at this juncture, the Congress could be inhibiting both human and non-human commercial space development rather than encouraging it.

SpaceRef staff editor.