# 64 FR 54448: Financial Responsibility Requirements for Licensed Reentry Activities

> Federal · Regulations · In force

URL: https://www.frixlaw.com/law-library/statutes/FR_PRORULE_99-25457

## Section

- **Citation:** 64 FR 54448
- **Heading:** Financial Responsibility Requirements for Licensed Reentry Activities
- **Jurisdiction:** Federal
- **Kind:** Regulations
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** Federal Register / Vol. 64 / 64 FR 54448

## Text

Part IV

Department of Transportation

_______________________________________________________________________

Federal Aviation Administration

_______________________________________________________________________

14 CFR Part 450

Financial Responsibility Requirements for Licensed Reentry Activities;
Proposed Rule

Proposed Rules

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.
d 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
ts 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
net 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)
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
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

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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fication 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
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
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
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
tices. 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

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
f 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
ted 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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nal 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
ate 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
f 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
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

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
nventional 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
h. 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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d 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
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
. (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

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
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
e, 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.
---------------------------------------------------------------------------

\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.
---------------------------------------------------------------------------

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
ad 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)
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
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

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
e 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
ng 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.
---------------------------------------------------------------------------

\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.
---------------------------------------------------------------------------
ly 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
tivities 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
cluding 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; * * *''

(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
-
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
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
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
re 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
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-

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
ble 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
h 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
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
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
akes 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.

Reentry Vehicle Financial Responsibility
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.

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
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.
---------------------------------------------------------------------------

\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.
---------------------------------------------------------------------------

Section-by-Section Analysis
sions, 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.
---------------------------------------------------------------------------

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
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
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
ized 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

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
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
ufacturers 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
ed 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
ld 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
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

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
ay 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
roposing 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 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
ehicle; 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
nce 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

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
er 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
lved 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
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
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.
entry 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.

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)
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
rs 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 Vande

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/FR_PRORULE_99-25457. Check the current official text before relying on it. Not legal advice.