Testimony of Michael S. Kelly: The Commercial Space Act of 2003

Testimony of Michael S. Kelly

Before the Subcommittee on Space and Aeronautics

U.S. House of Representatives Committee on Science

Regarding HR 3245, “The Commercial Space Act of 2003”

5 November 2003

Mr. Chairman, and Members of the Subcommittee on Space and Aeronautics, thank you for giving me the opportunity to once again testify on issues of crucial importance to the future of space transportation.

The issue before us today is the regulation of a future industry, the “Reusable Launch Vehicle” (RLV) industry, specifically in its application to carrying paying passengers. The very first question to ask in this regard is: does the United States Government have any legitimate reason to regulate the RLV industry at all? Put a different way, is there a requirement from the people of the United States for such regulation? If so, the requirement can be identified, and all subsequent answers can be answered in a context.

My position is that there is a legitimate requirement for regulation of RLVs (or any commercial space flight) by the government, for only the following reasons:

• Defining and enforcing the boundaries of action which protect the lives and property of one group of people from the actions of another has always been the proper function of government
• RLV operations do pose a hazard to uninvolved parties, domestically and even abroad (for orbital operations)
• The job of coordinating national and international safety is a large one, requiring the action of the federal government
• Other international considerations, such as treaty compliance, can be handled only by the government

These are the requirements for government regulation, and there should be no regulation beyond what is required. People who have the financial means and the desire to fly as passengers on an RLV have the absolute right to do so. The government has no legitimate authority to restrict that activity.

The office designated to license commercial space launch is the FAA/AST. It was established to ensure public safety while promoting the commercial space industry. With regard to who should regulate the flight of commercial RLVs carrying paying passengers, it should in my opinion be AST. The extent of that regulation, however, should not reach beyond AST’s charter of protecting the lives and property of uninvolved parties.

Today there is a licensing regime for commercial RLVs that meets the AST charter. It need not be extended in order for RLVs to carry paying passengers. The Commercial Space Act of 2003 contains language requiring disclosure to paying passengers, and if that is met, those passengers are no longer uninvolved third parties. They are as informed as the hundreds of astronaut candidates who spend careers competing for a ride on the Space Shuttle, knowing full well the dangers involved.

It is critical to note the difference between travel on an airline and a ride on an RLV. An airline is a routine mode of transportation, a “common carrier” if you will. People have come to expect a degree of safety in air travel that is without parallel in transportation, or in fact in any other human activity. Space flight is years from being routine, or even a mode of transportation per se. Transportation refers to reaching a desired destination. Space flight, for the foreseeable future, will be an end in itself.

The type of regulation over a common carrier that demands the level of safety of air travel is different in kind from that pertaining to what can only be classed as an adventure ride.

I have supported the division of AST from FAA/AVR, which regulates aviation, because the two have different and incompatible charters. AVR regulates an industry with an 80+ year revenue history, and a 100 year technology history. It applies the vast experience gained over that time to insure that anyone can board an airplane as a paying passenger without undue fear of losing life or limb, and that uninvolved parties on the ground do not bear undue risk from the operation of aircraft.

That vast experience came at a price, and was applied very late in history. There were fatalities among aircraft developers, passengers, and uninvolved parties. Even with regulation from AVR, there are still fatalities and loss of property among passengers and uninvolved parties. I do not question that AVR plays a large role in reducing such incidents, and as I have noted, has made air travel a uniquely safe human activity. This is possible precisely because there have been so many incidents to serve as hard lessons.

There is no similar body of experience with which to regulate RLVs. Only one type reusable space launch vehicle, the X-15, has ever flown. Three were built, two survive. They accumulated 199 flights, with one fatal accident, several non-fatal incidents, and one instance of property damage to an uninvolved third party. Thus, the only RLV flight experience has demonstrated the need for a legal authority.

However, AVR and AST have institutionally different roles and outlooks. AVR regulates a mature industry. AST is a relatively new office that regulates an industry that doesn’t yet exist, and that will not exist if regulated as a mature industry. AVR applies lessons learned, and is slow to allow innovation in commercial aviation precisely because it does not wish to stray from what has worked. There are virtually no lessons to apply to RLVs, and certainly none that would apply to all the types of RLVs that are envisioned or may be envisioned.

All of the lessons of the RLV industry lie ahead. Learning them requires freedom, the freedom of developers to use technology that is unfamiliar and unacceptable to AVR, and the freedom to fly paying passengers who knowingly accept the risks. These things are not within the cultural scope of AVR, and it is unreasonable (and even unwise) to expect that to change. AST has a culture that is open to more, by disposition as well as charter.

It is worth asking how AST is performing its role. The experience of RLV industry members to date has been mixed. Those in various stages of discussions of launch licenses report differing impressions, good and bad. Given the wide range of personalities involved, this should be no surprise. AST is an organization of human beings, in a new field, interacting with other human beings. There are going to be disagreements and disappointments.

My own personal experience, as a member of the RLV industry, and as Chairman of the COMSTAC RLV Working Group, is that AST is primarily an organization that lives up to its charter of protecting the lives and property of uninvolved parties while promoting the commercial space industry. There is room for improvement, naturally. Application of rules is being done for the first time, and both AST and developers have to learn how to do satisfy those rules.

We are also seeing that the rules themselves can be improved. The “Final Rule” on licensing of commercial RLVs was written before the first commercial RLV entered development, and that rule has already proven itself flawed. We in the industry helped write it, and it was the best all of us knew how to do at the time. But if we had it to do over again, there are things we all now know would be done differently.

If there is to be a change made to the Commercial Space Act of 2003 with respect to AST, it would be to mandate that the office periodically perform a zero-base review of its rules, and revamp them as required. In my view, this is the best way to continuously incorporate the lessons learned in what will be a very long learning period, while preventing the resulting rules from becoming mountains of corrections of previous mistakes.

There is one onerous aspect of AST that is a consequence of when it was formed. Because it was formed after the enactment of the National Environmental Protection Act, its licensing activities require NEPA compliance. For purposes of research and development flights, this places a burden on developers not experienced by experimental aircraft designers or, for that matter, by any other researchers. AST licensing does not distinguish between R&D flights and operational flights, but should. In fact, in my very first testimony before this Subcommittee, I advocated a class of license analogous to an Experimental Aircraft Certificate that would cover any number of flights confined to a certain performance envelope. Both the industry and AST have failed to follow through on that concept, but both recognize the need. Furthermore, AST has indicated that it will in fact grant such multi-flight licenses.

Whether authority can be granted to AST to apply the grandfathered principles of experimental aircraft development to relieve the unnecessary burden of NEPA compliance is not something I am qualified to judge. In last week’s RLV Working Group meeting, the developers and AST discussed this at length. The consensus was that statutory relief is unlikely, and that the only solution is likely to be a categorical exclusion resulting from a string of granted licenses all of which have environmental Findings of No Significant Impact associated with them. There is no doubt that this will be the outcome, since no activity associated with RLV development has ever resulted in anything else. I note it here only to lament that there is one intractable drawback to AST licensing, one that is not of AST’s making. I do not regard that one drawback as sufficient justification to place the future of the RLV industry in anyone else’s hands.

From the discussion of licensing and its purpose, the question of indemnification can be addressed. Since AST space flight licensing requires demonstration of safety of uninvolved parties and their property, it is not unreasonable to ask the government to indemnify those flights. In fact, if there is one thing I have learned it is that the only test of seriousness is the willingness of people to put up money. If the government issues a launch license, that license only has meaning if the government is willing to share the burden of the consequences of an accident. If the government is not willing to do so, the licensing activity is meaningless, burdensome showmanship.

By the arguments given above, this means that if the government does nothing more than ensuring the safety of uninvolved parties and their property, it does not bear the burden of indemnification for paying passengers on an RLV. The real question comes down to responsible risk taking. Is it responsible of the government to risk the taxpayers’ money to indemnify an industry when the government does not have a certain degree of oversight, or are there factors beyond that risk which justify it?

In my opinion, there are two factors which justify the risk. First, the same licensing process that ensures the safety of uninvolved parties and their property will in fact reduce the risk of loss of life in an RLV accident. The degree of care needed just to get to an RLV flight is very high, and there is little doubt that AST will require the exercise of even more care for a passenger vehicle if only because it will be a large vehicle. Second, the charter of the government to promote the industry, with all of its potential economic benefits, justifies some risk. Once again, it is a test of seriousness.

There is an aspect of indemnification that is often overlooked, however, and that is reasonableness of the magnitude of the maximum probable loss. Though I do not have current figures at my disposal, the last number I recall for third-party launch liability insurance was $900 million. Whether we are talking about expendable or reusable launch vehicles, each has to demonstrate a probability of less than one in 30 million casualties per flight in order to receive an AST license. This automatically constrains flights to sparsely populated areas. An accident affects only a small portion of those areas, yet any reasonable appraisal would show that the entire area isn’t worth $900 million.

Like so many things associated with space flight, the unreasonably high limits of loss are the result of a very human trait. When faced with an unknown of any kind, human beings automatically assign an unquantified, but arbitrarily high risk to that unknown. Only after acquiring knowledge based on experience do people begin to place risk in the proper hierarchical order. The first part is what has kept us from extinction. The second is what allows progress. Unfortunately, the placing of risk in proper hierarchical order is sometimes either very slow to come, or never happens at all. In those cases, progress either lags or ceases.

In the Western world, there has never been a case of a third-party human fatality due to a launch accident. The only property damage of which I am aware has been the loss of a cow to a V-2 that strayed into Mexico, and the top of a camper sheared off by the wing of an X-15 as it made an emergency landing approach that came too low over a highway (the latter is the one instance of third-party property damage caused by an RLV).

These do not add up to $900 million.

I support indemnification of the RLV industry when it comes to third-party life and property loss, simply because the government will not permit RLV flights unless they meet third-party safety requirements. I support indemnification with respect to passenger flights, primarily because the risks are mitigated by the licensing process. It is with less enthusiasm that I support this indemnification as a means of promoting the industry, but the risk to the government is fairly small. What I would suggest is a reexamination of just how much exposure there is. I do not believe that it is close to the magnitude we have always thought, and a realistic assessment may make the government more comfortable in assuming this contingent liability.

The final issue to be addressed is where the regulatory body for human passenger space transportation should be located. I have already stated my position that I believe AST to still be the regulatory office of choice, and will maintain that position as long as AST fulfills its charter. Another question is whether AST should be part of the FAA, or moved to another place.

This is a question I’ve wrestled with for years, and the answer is never as clear cut as I would like. There are definite advantages for AST to reside within FAA. The latter has the entire National Air Space under its jurisdiction, and perhaps the biggest practical concern in space flight is coordination with the NAS. Here the lives and property at stake are of a large magnitude, but FAA has the infrastructure to permit space flights to coexist with the NAS. This coordination extends to foreign countries. Replicating the mechanisms already in place would be horrendously inefficient, if it were even possible.

However, there is also the cultural issue to consider. FAA’s culture is geared toward a technological status quo which makes for unparallel safety in aviation, but which is absolutely incompatible with the needs of an industry whose technologies are yet to be defined. Large organizations can and generally do taint smaller ones. I am amazed at the degree of autonomy and cultural identity AST has managed to maintain. I have also observed the cost of that maintenance. There has been no small amount of energy spent on territorial matters that serve no one’s interests in the long run.

I think the right solution is to leave AST in FAA, with one powerful proviso: when it comes to matters of commercial space flight, the Associate Administrator for Commercial Space Transportation has the last word. Much controversy could be avoided, and uncertainty removed, if such a mandate existed. To quote one of the developers with whom I discussed this matter, the Associate Administrator “must have a bazooka” to ensure that AST is allowed to fulfill its charter. Given the vast resources available to AST within the FAA, however, it should remain there.

The concept of AST as a “clean sheet of paper” organization that could grow with an emerging industry is what I supported from the beginning. There have been many setbacks for the industry in the intervening years, and AST has occasionally gotten ahead of itself and the industry in its rulemaking zeal. But as far as interactions among organizations of people go, the AST/industry relationship has been remarkably good.

I see no fundamental flaws, and nothing that cannot be corrected. Yes, there are problems, if one regards the inevitable disputes of an industry with a regulatory body as problematic. Where an activity of AST does not contribute to the end of ensuring the safety of uninvolved parties and their property, it should be changed – and given AST’s past performance, I do not foresee any resistance to this. I would suggest mandating periodic zero-base review and rework of rules in order to ensure that the AST process does not fossilize.

What I would not like to see, and what I think is to no one’s benefit, is a change from a regulatory organization that has achieved a substantial degree of understanding of the industry it is regulating to one whose regulatory approach is incompatible with that industry.

I think that, overall, we are on the right track with AST. It has the charter and the spirit to safely promote the emerging RLV industry, including the passenger RLV industry. The Commercial Space Act of 2003 will play a large, positive part in seeing that industry come into being.